Italy plans on taxing digital companies from 2020

Italy plans on levying a 3% tax on all internet transactions from 2020.

In a significant development of widespread ramifications, the Italian government has approved a new tax on digital companies, including U.S. tech giants, as part of its 2020 draft budget.

The move could potentially draw threats of retaliation from the United States.

The new tax, scheduled to kick-in next year, will force digital tech giants, including Facebook, Amazon and Google to pay a levy of 3% on internet transactions, according to the text of the draft budget.

Washington has repeatedly said, the levy unfairly targeted U.S. firms. According to a senior U.S. official, U.S. President Donald Trump is ready to threaten retaliation when he meets Italian President Sergio Mattarella in Washington.

As per a source, the proposed levy is expected to yield around $662 (600 million euros) a year.

Italy’s move comes midst efforts to find alternative sources of revenues which will allow it to avoid a scheduled increase in sales tax.

Members of the European Union have long complained about the way web giants collect huge profits in their countries but pay only a few million euros in taxes each year. Members of the EU have yet to agree on how to tax these firms.

In August, France and the United States had reached an agreement over the French move to tax big internet companies, with France agreeing to repay these companies with the difference between the French tax and a planned mechanism being drawn up by the OECD.

For now, these internet giants can keep booking profits in low-tax countries, such as Luxembourg and Ireland, regardless of the source of the country of origin of their revenues.

Italy’s plan is broadly in line with proposals from the OECD, which last week urged governments to redraw rules for taxing global giants.

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