Italy wants to tax big tech companies starting January

Italy is inspired by France’s approach.


Modern problems require modern solutions. According to The Wall Street Journal, Italy is trying to rein in big tech by putting a 3 percent tax on the digital revenue of certain companies. "Certain" is the operating word here as the tax, which will take effect on January 1, would be applied to companies with more than €750 million (about $840 million) in global revenue. In Italy, local companies need to reach a €5.5 million ($6 million) mark to be taxed.

Italians following the French lead — Italy isn't alone in trying to regulate the presence and power of major tech companies. Previously, France announced it would tax big tech firms, including American enterprises.

In the summer of 2019, France's Finance Minister Bruno Le Maire told Reuters that the French interest in taxing these companies came down to creating a system based on accountability and transparency. This was, funnily enough, after Donald Trump threatened to tax French wines if France went ahead with taxing American tech companies.

"It’s in our interest to have a fair digital tax," Le Maire told Reuters at the time. "Please do not mix the two issues. The key question now is how we can we get consensus on fair taxation of digital activities."

The ball’s in OECD’s court — As The Wall Street Journal reported, America and other countries appear to be deferring to what the Organization for Economic Cooperation and Development (OECD) will ultimately decide. Before tech companies became undeniable and powerful market players, taxes would be levied based on how much and just where value was being produced. It's a different world now. Tech companies can introduce products to foreign audiences and manage to avoid local taxes. Italy’s proposal for the 3 percent tax would somewhat fix these loopholes.

For now, it will be applied to B2B (business to business) exchanges but if Italian regulators want to further tighten their hold and let tech companies know that they’re not playing around, they might even target business to consumer transactions like streaming services.