The so-called “web tax” is expected to bring an extra €114 million per year into the Italian treasury’s coffers when it comes into force from January 2019.
Under the proposal, reviewed by senators this weekend, a flat rate tax will apply to sales of digital services such as online advertizing. When an Italian company buys adverts on Google, for instance, 6 percent of the value of the sale will be withheld and paid to the Italian tax office.
The finance ministry has promised to define exactly which services are taxable by April 2018.
It has already specified that agricultural companies and those in flat rate or small taxpayer schemes will be exempt from the web tax, which is expected to target primarily multinationals like Google and Facebook.
Italy is one of several countries that has been pushing the European Union to reform the way that tech giants are taxed, arguing that companies should pay a percentage of the revenues they generate in European countries.
Currently companies are taxed on profits, which allows them to book profits in countries with the most favourable tax rate and pay minimal tax even in countries where they make significant sales.
While France, Germany and Spain are also considering national legislation on the issue, Italy could be the first country to introduce it.
The measure, which has already been proposed several times in different forms, is unlikely to face much opposition in Italy. As Paolo Cellini, a professor of digital economy at Rome’s Luiss university, recently told the Financial Times, US technology companies are the “perfect target” for Italy’s left-wing government as it prepares for a general election next spring.
Such companies “don’t pay taxes. They don’t create employment. They take money abroad and they are foreigners,” he said.
The web tax proposal is contained in an amendment to Italy’s budget law, which the lower house of parliament is expected to vote on by the end of the year.