Italian budget commission approves web tax on digital services

ROME (Reuters) - The budget commission of Italy’s lower house approved on Tuesday a measure obliging companies to pay a 3 percent levy on some internet transactions in a move aimed at bypassing EU tax rules that benefit large tech firms.

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The European Commission said it understood concerns over existing regulations, but urged member states to wait for Brussels to come up with an EU-wide solution to the problem rather than go it alone with separate legislation.

Italy has long complained that companies such as Amazon, Apple and Google have avoided taxes by maintaining they do not have a “stable presence” in the country, even though they generate huge revenues there.

To get around that hurdle, the new “web tax” will be aimed at firms buying “intangible digital products” such as advertising and sponsored links embedded in webpages. E-commerce trade will not be targeted.

The finance ministry has said it will identify exactly which services are taxable by next April. The sales levy will be introduced in 2019 and is projected to bring in 190 million euros ($224.2 million) a year.

Companies will only have to pay up if they make more than 3,000 digital transactions in a year.

The measure is included in the 2018 budget bill, which has to be passed into law before the end of the year. The upper house Senate originally proposed a 6 percent tariff, but this was halved in the lower house.

Under EU law, corporate taxes are paid where firms have a physical presence, which allows large digital multinationals to book most of their profits in the low-tax countries where they have set up headquarters.

Italy, France, Germany and Spain are pushing to change the EU tax legislation, but are facing resistance from smaller nations like Luxembourg and Malta, which fear reform could hurt their economies.

France has also proposed its own national, digital levy, but the European Commission urged countries to hang fire.

“Member States are understandably frustrated at the revenues they are losing. But a patchwork of national measures could create loopholes, legal clashes and distortions in the Single Market,” said a Commission spokesperson in Brussels.

“The European Commission is currently examining all possible policy options so as to propose next Spring new rules for taxing the digital economy.”

Reporting by Giuseppe Fonte in Rome and Francesco Guarascio in Brussels; Writing by Crispian Balmer; Editing by Richard Balmforth