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Digital Business Lawyer

Italian Parliament debates national levy for digital sales

President of the Commission for Industry, Commerce and Tourism of the Italian Senate, Massimo Mucchetti, announced on 13 November 2017 a proposed amendment to Italy’s draft Budget Law 2018, which would see the introduction of a so-called ‘Web Tax;’ the initial proposal targeted Italian purchasers of services from multinational digital businesses, and has since been amended to apply to purchasers from Italy-based digital businesses too. Such purchasers are currently not required to pay the same amount of tax when purchasing from non-Italy-based businesses as they would be if purchasing services from businesses based in Italy. The Web Tax, which it is proposed would be set at 6% of the value of purchases made over €30 and which would not apply to purchases made by individuals, has since been the subject of debate in the Italian Parliament.

“Companies based in EU territories suffer the burden of a comparatively heavier taxation of their incomes,” said Daniela De Pasquale, Partner at Studio Legale. “This does not only hinder the growth of domestic companies but obstructs the access of new digital enterprises to the market. The Web Tax has been extended to Italian companies as well, in order to avoid claims of protectionism and ‘state aid.’ This is however liable to generate some instances of ‘double taxation’ for Italian companies, and for this reason additional amendments are under discussion, including the introduction of a tax credit for Italian companies. Given all this, it is my opinion that this is not the right way to tackle this fundamental issue: a solution must be sought at international and European level and the problem must be solved through a coherent and unified tax policy, avoiding a patchwork of different national policies.”

The proposed Web Tax follows efforts made by the European Commission (‘EC’) to address the issue of digital taxation in the EU in recent months. On 21 September 2017 the EC adopted a communication entitled ‘A Fair and Efficient Tax System in the European Union for the Digital Single Market’ in which it stated that its preferred option is to implement the Common Consolidated Corporate Tax Base proposal (‘CCCTB’), initially proposed in 2016. “I believe the Italian proposal may work as a beneficial wake-up call for Brussels to accelerate the process of improvement and adoption of the CCCTB,” comments De Pasquale. “Our initiative shows the concern shared by many EU Member States and I hope it will convey this sentiment with more strength.”

On 22 November 2017 the UK Government published its position paper ‘Corporate tax and the digital economy,’ in which it states that it will introduce legislation “seeking to tax profits that multinational groups make from selling products and services to UK customers, where those profits have been transferred to an entity in a low-tax country which has been awarded ownership of the group’s intangible assets.” It will do so by extending the UK’s withholding tax to cover royalties paid, in connection with sales to UK consumers, to low or no-tax jurisdictions. “The Government is sending a strong signal,” said Helena Kanczula, Director at Blick Rothenberg. “The challenge will be over whether the collection of tax can be administered properly and it is unclear just how HMRC will engage international businesses to respond to the withholding requirements.”

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