International

After France, Italy approves digital tax on large tech companies

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The Italian parliament has approved a three percent digital tax on some digital revenue of technology companies that make over $831 million in global revenue, including least $6 million in Italy.

Following in the footsteps of France, Italy has approved a new tax to be levied on large tech companies, a move that is likely to put more strain on the country’s relations with the U.S.

The new tax passed this week by Italy’s Parliament will come into force on January 1, the Wall Street Journal reported on Tuesday.

The Italian parliament has approved a three percent digital tax on some digital revenue of technology companies that make over $831 million in global revenue, including least $6 million in Italy.

The tax is similar to the one France implemented earlier this year which has attracted severe criticism from the U.S.

According to a report in The Epoch Times, dozens of countries are working on proposals to change corporate tax schemes to capture money from tech firms that have users across the world, such as Facebook and Google’s parent company Alphabet.

In a recent letter to the Organization for Economic Cooperation and Development (OECD), a think-tank of rich economies, Treasury Secretary Steven Mnuchin said that there were concerns about a proposal put forward by some countries.

The U.S. “firmly opposes digital services taxes because they have a discriminatory impact on U.S.-based businesses and are inconsistent with the architecture of current international tax rules, which seek to tax net income rather than gross revenues,” Mnuchin wrote.

France’s digital services tax “discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies,” U.S. Trade Representative (USTR) Robert Lighthizer said on December 2.

“USTR is exploring whether to open Section 301 (of the Trade Act of 1974) investigations into the digital services taxes of Austria, Italy, and Turkey,” Mr. Lighthizer said. “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”

Section 301 of the Trade Act of 1974 provides the U.S. with the authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services.

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Printable version | Jan 24, 2020 11:17:23 AM | https://www.thehindu.com/news/international/after-france-italy-approves-digital-tax-on-large-tech-companies/article30400513.ece

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