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back to article Italy's 'Google tax law' could fall foul of EU discrimination rules

The European Commission has warned that Italy's proposed "Google tax law" would likely break European Union rules on non-discrimination, Reuters reported. The Italian government first floated the idea of the law last month, which became known as the "Google tax law" for what is seen its obvious target. The rule would require any …

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Anonymous Coward

Parasites

So it would only apply to american ad parasites like Google and Facebook?

Can't see a problem with that.

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Anonymous Coward

No surprise to me

Had my spare wheel stolen in Italy...... Along with the Land Rover bonnet it was attached to.

They might have a moral point, why stop at this when the whole country is in such financial sh@t but they are all still a bunch of thieves.

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"stopping the so-called double Dutch and Irish sandwiches": Not quite

The double Irish and Dutch sandwich are stratagems which allow Google (and Apple, etc.) not to pay tax anywhere in Europe. But were these to be stopped, the companies would still be able to pay income tax in a single European country, whichever they prefer. Typically, that would not be Italy. And that is what this legislation is trying to stop. And that is what is the problem with the legislation, because the European laws were precisely designed to allow doing business everywhere in Europe and paying income tax in a single country.

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Big Brother

Re: "stopping the so-called double Dutch and Irish sandwiches": Not quite

This is the age and time where 15% VAT is regarded as "unfair" and 30% income tax is "low" and where politicians are looking for hidden cash pots all over Europe to keep their promises about the voters' good life going for a few hours more. Apparently they believe that "the rich" have huge stashes of euro bills in Uncle Scrooge-style bunkers - instead of owning factories and commerce that provide MUH JOBS.

I'm awaiting the righteous bloodying of Jewsspeculators and hoarders and talk of nationalizations as well as harsh penalities for "antisocial" entrepreneurs any minute now.

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Anonymous Coward

Re: "stopping the so-called double Dutch and Irish sandwiches": Not quite

"laws were precisely designed to allow doing business everywhere in Europe and paying income tax in a single country"

And that's worked out so well for the EU hasn't it? seeing as they (the american parasites) pay virtually nothing in Europe (or the USA but that's their problem) and send all the cash to the Cayman Islands.

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LDS
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Re: "stopping the so-called double Dutch and Irish sandwiches": Not quite

The problem is right now the heavy burden of taxation is sustained by the middle class - which can't take advantage of subsidies going to the lower class (to ensure they keep voting), and can't dodge tax like the upper class can, being able to move them to tax heavens easily.

Companies like Google, Apple or Amazon don't provide good jobs outside their corporate centers (in the US) and some local exec. Instead they offer low paid bad jobs (while Amazon employees in German wants a strike?) because they need just low-end jobs.

Other companies are "off-shoring" jobs to China, India, Bangladesh or cheaper East Europe countries, while jobs in Western Europe are diminishing. Italy, for the matter, has an high unemployment rate especially among younger people, because there are no more factories - moved and moving elsewhere - and commerce can't sell much to people who pay too much taxes, or to people with no salary at all. And it's starting to backfire, see how the automotive industry is having hard times because people don't want to change car if they are unsure about their job and salary.

The only way to get out of the crisis is to lower expenses (but that's often subsidies to lower class people and to the industry...), and cut taxes to the middle class, instead of raising them. But that also means the upper class has to stop to dodge taxes - otherwise soon there will be no middle class at all, and all the factories can only sell goods to the new Chinese middle class and in Middle East.

Companies like Google & C. are not helping the economy, they are just siphoning away huge pile of cash and don't create many jobs, nor good ones, outside California. And they damage local companies that can't dodge taxes so efficiently.

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LDS
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Re: "stopping the so-called double Dutch and Irish sandwiches": Not quite

Yes, but the EU should not allow some countries - Irleland, Luxembourg, Netherlands, to act like tax heavens and help tax dodging.

If you look at them, they are all small countries, with a few million inhabitants, and they can survive happily that way. Countries with ten of millions of inhabitants, can't sustain themselves the same way, because they are much more expensive to manage.

Ireland & C. are heavily damaging the other countries, but when they're in trouble, it's to the larger countries they ask for money, because these are the only one that can find them. It can't work that way in a Union.

Sure, the Italian proposal is against *actual* EU legislation, but the legislation is wrong and need to be changed. Of course the foundation of a free trading and business area can't be changed, but countries within that area should not be allowed to do something very alike "dumping". Italy acted in the wrong way because our politicians are very bad when it comes to matter like those, they are used to pure political games, when economics comes into play their lost, but something has to be done at the EU level.

Would Ireland be happy if Italy would setup something to allow Guiness sell beer to them from Italy and don't pay a dime for every beer sold in Ireland?

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Re: the heavy burden of taxation is sustained by the middle class

The heavy burden of taxation is always sustained by the middle class. It's a pure function of economics. The poor don't have it to pay. The rich don't need to engage in whatever activity is taxed, or can pay lawyers to find loopholes.

Tax rates on businesses are irrelevant. Anybody with the smarts God gave to a dog can see that for a business, taxes are just another cost to be passed along to the consumer. If they can't be they go out of business and that hurts everyone. This crap about companies dodging taxes in nothing but greed and envy masquerading as caring about poor people. The worst kind of tyranny the world has ever seen.

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Amazon and others use exactly the same sort of tricks and exploit the same loopholes as the advertisers. Personally I can see no reason for them to be excluded.

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Mushroom

Keep your stinky fingers off productive capital

Supporters have claimed that the measure could add at least a billion euros a year to the coffers, a much-needed cash injection for the country, which has the second-highest level of debt in the EU after Greece.

These supporters are the people very near the state: taxfeeders, cronies, mafiosi and assorted parasites.

A "cash injection" for a bottomless pit of incompetence and graft is not a "measure" - it is utter waste.

It is not a coincidence that before hiding under the kimono of the Eurozone (thus effectively performing trans-european socialization of its debt problems), the lira underwent serial devaluations.

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Re: Keep your stinky fingers off productive capital

I believe it would also allow companies based in one country only to have the same or similar level of taxation of multinationals.

Which is the principle of a free market - making every company compete in a fair environment. Turns out that those who most bang on about free market are those who do everything they can to distort it in their favour...

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Re: Keep your stinky fingers off productive capital

"Keep your stinky fingers off productive capital "

I'm not really convinced of the productivity of Apple's $100bn tax-haven-based cash pile, and at any rate it would be productive in the US, not Europe, when quite a chunk of it came from European operations that we tax free.

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Re: Keep your stinky fingers off productive capital

"A "cash injection" for a bottomless pit of incompetence and graft is not a "measure" - it is utter waste."

While true, it has no bearing on the specific issue of tax fairness. If the government was being run well and efficiently it would still be wrong for rich multinationals to be allowed to avoid paying tax while normal smaller businesses and individuals are not.

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LDS
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Re: Keep your stinky fingers off productive capital

Not even in US, because when Bush allowed them to bring money into US from tax heavens for "investments" those investments turned magically into buy-backs, dividends and the like. No investment at all for production and to create more jobs.

Maybe lowering taxes to local companies that in countries like Italy sustain a mad tax rate (it can reach well over 50%, sometimes close to 70%, beyond the income tax, there's the production tax, the tax on buildings, etc. etc.) would create far more jobs locally and not new Apple's jobs in China.

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Anonymous Coward

Re: Keep your stinky fingers off productive capital

"those investments turned magically into buy-backs, dividends and the like"

Exactly why are "dividends" a problem. Dividens get taxed at the recipient and for the most part what is left is (a) spent or (b) invested (or deposited in a bank account and therefrom re-lent etc.)

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LDS
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Re: Keep your stinky fingers off productive capital

How naïve.... first, the company income doesn't pay the company tax but a far lower rate because they promise investments and new jobs. Than dividends are taxed by something alike the "Jobs and Growth Tax Relief Reconciliation Act of 2003" which lowered substantially the dividend tax too, while buybacks increase the value of shares a lot. Overall, they increase their capital paying far lower taxes than the poor mortals who can't employ a combination of sophisticated accounting techniques and political pressures.

The promised investments to create new jobs - the reason for allowing money to be brought back - never materialized - and "what is left" is spent a) in luxury goods, which doesn't mean much new jobs, especially when that good comes from abroad b) invested in financial tools often abroad, which in turn don't create any job c) deposited in banks again often outside the country and again, if possible, in some tax haven.

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Re: why are "dividends" a problem.

The only problem with dividends is that money grubbing thugs in government and their sycophant minions posting on El Reg tax them twice and still want more.

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Hmm

The actual proposal wouldn't have made any difference at all to Google or Facebook. Because it was all about VAT. Which is a tax on consumers, not producers.

Even if it were not found illegal under EU law (as I've been predicting it would be) all Google would need to do is appoint an agent in Rome, give him a 0.5% margin on all sales and still send all the cash to Ireland.

The people who proposed this are simply incompetent.

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Thumb Up

Re: Hmm

"Simply incompetent" is a perfectly good phrase to describe what passes for Italian government. There are myriad others such as "self serving" , "corrupt", "detached from reality" and "at a Bunga Bunga party"

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LDS
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Re: Hmm

No, you didn't understand. The requirement of having an Italian VAT code means it would be a company subject to Italian taxes, not VAT only.

Anyway the real issue is the allowance for huge payments for "intangible assets" like brands, and the like. That's another way they use to lower the real income pretending huge payments from, for example, from Google Italy to Google Ireland for the use of the brand "Google". There should be some mechanism to stop this silly mechanism for companies that don't really pay for a brand but only pretend inside the same ownership.

Anyway when EU wanted the VAT when buying abroad (buy something in the US, even a software via download, and the US company must collect EU VAT and send it to EU) no one complained, because that just hit the consumer, not the seller. No one them screamed about "lost jobs", "no investments", and so on. As long as the poor consumer pays it's all OK, if some large corporation has to stop dodging tax then politicians raise from the seat - probably because they start to think where the money for the reelection comes from...

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LDS
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Re: Hmm

You're right. But the EU Commission is not better. They to are just thinking how to ask citizens more money without touching the interests of their friends in large companies...

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Re: Hmm

> appoint an agent in Rome, give him a 0.5% margin

Or appoint an agent in Rome, charge him 101% of all revenues as a licensing fee and then apply for Italian government aid to help this struggling local business

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Vic
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Re: Hmm

> There are myriad others such as "self serving" , "corrupt"

When I was in Sardinia, some years ago, corruption was pervasive. If you wanted anything to happen, you knew who to pay, and what it would cost.

The thing is, it was actually cheaper and more effective than it was back home. Getting things to happen was comparatively easy...

Vic.

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Re: Hmm

"Even if it were not found illegal under EU law (as I've been predicting it would be) all Google would need to do is appoint an agent in Rome, give him a 0.5% margin on all sales and still send all the cash to Ireland."

The way these avoidance scams work at the moment is that an Italian company, wanting to advertise on Italian websites go speak to an agent of Google in Italy. That agent negotiates prices etc and then, for no logical reason, the "sale" is completed in Ireland by someone the Italian company have probably never dealt with in any way shape or form, and Google get to pay Irish tax only.

What this law is, rather clumsily, attempting to do is force that final step to count as a sale in Italy - which 99% of people would probably agree it should be - and thus be subject to Italian taxation. This way big multinationals have to compete on a level playing field with smaller local companies who aren't in a position to play the system in the same way.

This particular implementation may be wrong and almost certainly tramples over a bunch of EU rules, but it's hard to disagree with the principles behind it, that companies should be subject to the tax laws in the countries they do business and not be able to simply divert profits to anywhere they like without consequence.

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Right, so all google needs to do is remove the .it version of Google and redirect them to google.com. Problem solved, they no longer operate in Italy - but of course, still make all the same money and sell all the same advertising.

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LDS
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No, because that way they would pay the US tax, and it would be much more difficult to buy and sell among foreign companies outside the EU.

What they really need is open subsidiaries which can be used to raise money while paying fake fees for brands or the like to the company based in the tax haven, so the former has no income and the latter doesn't pay taxes. It's a complex scheme that requires companies based in different countries.

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google.mt?

I'm not sure how Malta's tax rates are, but they'd almost have to be better than Italy's.

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Errr, what? The currently run google.com now obviously and still don't pay any tax, so nothing would change. It doesn't really matter what domain you operate under anyway, as long as you dont employ or have offices in a particular country, its hard for them to do anything about it.

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Mushroom

Oh Boo Hoo

Stop all the whinging and snivelling and get yourself onto the backs of your elected incompetents and get the tax law changed. It doesn't matter which side of the pond you are on; both sides are getting screwed by large corporations of all sorts who can buy their friendly local politicos.

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Re: Oh Boo Hoo

"Stop all the whinging and snivelling and get yourself onto the backs of your elected incompetents and get the tax law changed. "

Why would that matter? What these companies are doing is already illegal - making accounts of false "internal" trades which serve no purpose other than reducing tax liability - and SMEs do get tried and fined for exactly this. But Google and Amazon don't, and never will so long as politicians allow themselves to be hypnotized by their "big name brands".

The truth is that Amazon and Google could vanish tomorrow and by February we'd wonder why anyone cared.

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Anonymous Coward

You can sort of see why big global companies are so profitable. They can abuse EU and global laws all they want since it requires all countries to change laws at the same time to change anything.

The global political elite are funded by the global players, so nothing changes.

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Anonymous Coward

It's a sad fact of life that money is power, and so lots of money enables you to do very powerful things, like manipulate a system and use it for personal gain. Early Capitalists set course for this destination some time ago and I don't think we're turning back. And there's no obvious answer apparently. The only way for what I hope is the majority of elected or appointed officials to keep some control over the career criminals financiers is to give the state far greater powers. Not too popular with newsreaders.

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