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Google Advertising Government The Almighty Buck

Italy Approves 'Google Tax' On Internet Companies 236

recoiledsnake sends this news from Bloomberg: "Italy's Parliament today passed a new measure on web advertising, the so-called 'Google tax,' which will require Italian companies to purchase their Internet ads from locally registered companies, instead of from units based in havens such as Ireland, Luxembourg and Bermuda. Google, for example, says that it sells nearly all its advertising in Europe from an Irish unit, leaving little taxable profits in the countries where its customers are based. That unit in turn pays royalties to a second Irish subsidiary, which says its headquarters are in Bermuda. Google last year moved nearly $12 billion to the Bermuda unit, the majority of its worldwide income, cutting more than $2 billion off its global income tax bill. Google's Italian unit last year reported total income taxes of just 1.8 million euros, corporate filings show."
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Italy Approves 'Google Tax' On Internet Companies

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  • Loophole closed (Score:5, Interesting)

    by timeOday ( 582209 ) on Tuesday December 24, 2013 @09:32PM (#45779655)
    Sounds to me like closing a loophole more than instituting a new tax. I realize that is a matter of interpretation, but the idea that google, apple, etc are "really" in Bermuda etc. is such a hoax in the first place.
    • by schwit1 ( 797399 )

      What loophole? Is it only a loophole when you don't agree with it?

      Google is serving ads from everywhere.

      Maybe a consumption tax on goods and services would be better for the 21st century.

      • Re:Loophole closed (Score:5, Insightful)

        by currently_awake ( 1248758 ) on Tuesday December 24, 2013 @10:31PM (#45779935)
        If people in Italy are paying money for something, then the income comes from Italy and should be taxed in Italy as income. If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government. We need to very carefully define where things are happening on the internet, there is a lot at stake for the world. Also it should not be legal for companies to put a clause in their EULA selecting a legal jurisdiction of their choice, when neither the customer nor the company are actually doing anything in that jurisdiction.
        • by SuperKendall ( 25149 ) on Wednesday December 25, 2013 @12:08AM (#45780305)

          If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government.

          Why is that so, if all of the equipment the ads are served from is not in Italy?

          Are you saying (and you are) that someone in Italy who wanted to advertise on a popular blog hosted in the U.S., should not be able to do so? Or that the blog owner should be required to pay taxes in Italy even though all costs are incurred in the U.S.?

          It's not like the person in Italy it not already paying taxes on his internet connection. It's not like they would not pay taxes if they bought something from the ad. It's not like the company who bought the ad is not paying Italy corporate income tax anyway.

          It makes no sense that someone operating in a totally different state should have to pay any taxes at all based only on where someone is browsing from, or who buys services from them.

          • by saider ( 177166 )

            They don't pay taxes where the costs are incurred either. The company buying the ads may also be playing the same game.

          • by viperidaenz ( 2515578 ) on Wednesday December 25, 2013 @03:07AM (#45780807)

            The equipment isn't in Bermuda or Ireland either.

            It makes no sense that a Californian company is paying tax in Bermuda when it does nearly no actual business there.

          • by peppepz ( 1311345 ) on Wednesday December 25, 2013 @04:20AM (#45780951)

            Are you saying (and you are) that someone in Italy who wanted to advertise on a popular blog hosted in the U.S., should not be able to do so?

            Yes. What's exactly wrong with that? If I bring three packs of cigarettes inside the EU, I will get fined at the border for evading something like 20 € of taxes, and my name will even end up into the list of smugglers. Even though the money was mine, and the cigarettes were made outside my country. Nobody has ever objected against that, because paying taxes is seen as normal. So if eluding 20 € of taxes is a crime, why should eluding 10 billion € be considered fair?

            It's not like the person in Italy it not already paying taxes on his internet connection.

            They're two different services, two different persons earning money, two different tax returns.

            It's not like they would not pay taxes if they bought something from the ad.

            It depends. If they buy them on Amazon, they won't pay a penny of taxes to Italy, thanks to the same Ireland-Bermuda trick, even though Amazon competes with italian sellers who do pay taxes and present comparable prices to the customers. It's a matter of fair competition, which certainly is very complicated to handle, but can't be dismissed altogether.

            • Re: (Score:2, Interesting)

              So if eluding 20 € of taxes is a crime, why should eluding 10 billion € be considered fair?

              Gah. Why do so many people not understand the difference between avoidance and evasion? Evasion is what happens when there's a rule, and you break it. Avoidance is what happens when politicians wish there was a rule someone was breaking, but there isn't, and as such tax avoidance is barely a well defined term at all. None of these companies are being accused of tax evasion. That would require someone demonst

          • Re: (Score:2, Insightful)

            by gnupun ( 752725 )

            Why is that so, if all of the equipment the ads are served from is not in Italy?

            That's only one half of the equation -- ad server equipment. The other half is the infrastructure (roads, internet, electricity, etc) built by the Italian govt. that makes it possible for an Italian to purchase something from the internet. How is Italian govt being compensated for this cost?

            It makes no sense that someone operating in a totally different state should have to pay any taxes at all based only on where someone is br

        • Only if you don't understand a global economy.

          You have taken the stance against a global economy. I'm going to ignore all of the little things, like finding a way to calculate all of the appropriate taxes without adding a cost to the consumers of purchasing a service to do exactly that in each nation, state, county, city, and locale on the planet.

          If where things happen is important, we need all kinds of geo-tagging and tracking to ensure people are not cheating on their taxes. Billions of $(currency) are

        • Re:Loophole closed (Score:4, Insightful)

          by Srin Tuar ( 147269 ) <zeroday26@yahoo.com> on Wednesday December 25, 2013 @02:43AM (#45780745)

          > If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government

          A contemporary, but yet outmoded thought, in my opinion. The internet really shows exactly how old
          fashioned this line of thinking is.

          What is italy ? The idea that a patch of land and history forms a magical entity which give a small group
          of people the right to tax and control the people living therein seems entirely arbitrary to me.
          People both within, and without italy, can access servers both within and without of italy's current ground boundaries.
          The goods and services and even idle chatter moving over the internet can be in any language, sold in any currency
          or other unit of account, or even be given away for free.

          Why should the italian government have any special purview over what is bought and sold over the internet ?
          Who's to say whether a specific ad targets italians or not, the language ? What if the ad is in english, would it still
          be considered to target italians? What is the advertized product is not sold in Euro's, would it still be taxable and
          subject to these regulations ?

          How about a product, made in china, sold to an italian speaking community living in london, hosted by a server
          which physically resides in sweden, and has a .info domain name; how many of these variables
            have to change to make it subject to these new rules?

      • Re:Loophole closed (Score:5, Insightful)

        by gl4ss ( 559668 ) on Wednesday December 25, 2013 @12:04AM (#45780289) Homepage Journal

        look man I'd agree with that ONLY IF GOOGLE DIDN'T HAVE FUCKING SALESMEN WALKING AROUND IN ITALY.

        but they do. that's all what the local offices basically do, selling advertisements and finding customers for the ads.

        if the sillyness doesn't stop then soon enough I while in europe I won't be buying from my swedish/finnish/german/whatever grocery store even if I go into the store.. they'll just technically make the business of buying happen in Ireland... and the store is just a "showroom" and a "delivery cache".

        • Re:Loophole closed (Score:5, Insightful)

          by hjf ( 703092 ) on Wednesday December 25, 2013 @01:01AM (#45780503) Homepage

          Agreed, as another example:

          Google Argentina S.R.L. is an actual company. You can see their data here:

          http://www.cuitonline.com/detalle/33709585229/google-argentina-s.r.l.html [cuitonline.com]

          Their credit status:

          GOOGLE ARGENTINA S.R.L. CITIBANK N.A. 10/13 1 1733,6 N/A -
          (means Google took a loan from Citi for ARS 1.73M or USD 300,000)

          AFIP (federal tax agency) reports Google Argentina SRL has a few tens of employees.

          So. Why should they NOT pay taxes in Argentina, if they are a registered company, with employees, who enjoy the benefits of being a company here (for example, they can take a loan). And they make their profits here and send them abroad completely untaxed.

          I hate paying taxes as much as anyone else. But what google does is not fair game. It doesn't allow companies to develop within the country: I'm pretty sure the first ting Larry and Sergei did wasn't exactly to register their company in the Cayman Islands. That was later, when millions already poured in, and creative accountants took over. They are simply exploiting a loophole.

          Lots of comments come here from americans, who are very loud about anti taxing, and yes, I fully agree that paying taxes sucks, but you have to understand this: the US prints the world's money. Italy doesn't. All international transactions are made in USD. Italy (and any other non-US country) loses money from their reserves to pay google. Google takes this money offshore. They do the same in the US, but it doesn't matter, as the US simply keeps printing more and more money to compensate (why do you think the USD is so devaluated?). Another thing to notice is that in most of the world, "technicalities", the really nitpicky details you see in police procedural dramas, don't apply. In most of the world, a cop doesn't have to read your rights. And laws are thorough and redundant, leaving little room for argument. And no, lawyers don't have a sexy job of sweet talking a judge. It seems most of you understand that judges rule according to how nicely a lawyer puts his arguments. That's complete bullshit, at least outside the US. A judge won't accept crap like "the suspect crossed the state line as he was firing so technically he fired from another state and his trial is null here".

          Making really stupid observations such as "the physical servers aren't in Italy" is incredibly shortsighted. Google is providing a service, and making money. They should pay taxes *LIKE EVERYONE ELSE*. By no means i say google should pay more, or less. I'm simply saying they should. Along with amazon, and any other company that makes not millions, but billions a year and pays ridiculous sums. They get to subvert the system, make a country lose millions every year in both reserves and lost tax money, unemployment from local companies that go broke because of the unfair competition,etc.

          This is just the beginning. Most countries will start applying restrictions like this to international companies once the volume becomes big enough. It's not a problem if a few thousand people across the country make purchases. But it is when millions do every day.

          • what google does is not fair game

            What google does is not ethical game. Deontology in nowadays big companies is long gone. Basically, the big groups as of today are money machines - their performance assessment is basically the result of the equation Revenue - Charges. Fairness is not involved, Compliance with the law is, because lawsuits are the only thing companies are afraid of, nowadays, i.e. losing a lawsuit = inflate the "Charges" account. Google does what the law allows them to do - they own a large team full of people looking for wa

      • You mean like VAT?

    • So they're really in Italy?

      Ireland and Italy are both part of the EU single market. I don't know enough EU law to say for sure, but this might get struck down by a European court.

      • Sure this is going to happen.

        Then Italy can decide it does not want to obey EU rules, and while I do not think Italy government has the balls to do it, it is technically possible, and it would be quite interesting. Remember EU has not army, and therefore no way to force a member state to obey.

        • Then Italy can decide it does not want to obey EU rules, and while I do not think Italy government has the balls to do it, it is technically possible,

          The Italian government has a long history of ignoring EU rules and court decisions. Just google "Lettori EU". However, in this case, the boot is on the other foot. The Italian government would have to use the courts to punish companies that did not follow an Italian law which does not comply with EU free market rules.

        • The EU needs no army to enforce its decisions. In fact, Italy has a long history of ignoring EU directives when they harm the powerful (while they're inexorable in applying them when they harm normal people). What happens in this case is that the EU opens an infringement procedure, which means that Italy has to pay a fine for each year of non-compliance with the EU laws. In the end, the fine gets paid by Italian taxpayers, so basically the powerful can continue ignoring the law, and normal people pay for it
    • Re:Loophole closed (Score:5, Insightful)

      by BSAtHome ( 455370 ) on Tuesday December 24, 2013 @09:55PM (#45779759)

      The problem, however, is that it may run afoul of European law by discriminating between national and European registered companies. It will depend heavily on the exact wording and application of the law whether the EU will allow it.
      The loophole should be closed on EU level, but /that/ is a hard thing to do with all the lobbying going on. Maybe it is time that the tax-systems get better harmonised between EU countries and sanity can be implemented (I know, utopian thoughts, but still).

      • by AmiMoJo ( 196126 ) *

        By the time it comes in and anyone has a chance to challenge it the new EU level tax system where companies pay based on how much business they do in each member state will start.

        Under the new system if you sell a billion Euros of advertising in France you pay tax on a billion Euros of sales in France, even if your corporation processes everything through Ireland. No bullshit, just pay your taxes or get out, your choice. If you don't want to pay there are plenty of others who will take your business.

        • You write that as if this "new EU level tax system" is being designed and deployed right now, but I've heard nothing about such a thing and it seems hard to imagine it happening, given that this was the system before the EU Common Market was created and it sucked hard, which is why it was replaced.

          The common market makes everyone richer by massively reducing the paperwork involved in running a company. A small company can set up a one-man shop in Italy and sell to all of Europe pretty much immediately, with

    • Re: (Score:3, Interesting)

      by Anonymous Coward

      It's going to get thrown out in a year anyway. Both Italy and Ireland are part of the EU, and membership of the EU requires the free movement of capital, people, goods and services between members states. Because the new law prevents Italians from buying a service from other EU member states, it's illegal under treaty - you can guarantee it will be challenged and overturned.

    • Sounds to me like a violation of EU common market treaties.

    • by mc6809e ( 214243 )

      Sounds to me like closing a loophole more than instituting a new tax. I realize that is a matter of interpretation, but the idea that google, apple, etc are "really" in Bermuda etc. is such a hoax in the first place.

      The idea that they're ANY place is a "hoax". If anything, these firms exist only as a collection of habits, customs, and rules -- as abstractions in the minds of the owners and employees. Even as owners and employees change, the firm can continue to exist as the firm's culture is transferred fro

      • They incorporate to save liability so they exist in a particular place insofar as a corporate structure is concerned.

        Them living on in the face of change is only a product of that corporation. Not that i support the 3 card monte they are playing for tax considerations. But all they really have to do to get around this is charge all their hardware and administration costs to thei " italy componant" making their tax obligations negligable.

    • The cool thing about this kind of gov't stupidity is that it will re-ignight the space race.

      US/Europe " You owe us taxes!!"

      Google "Feel free to stop by our Mars headquarters and pick up your check....lol"

      US/Europe "Hey China can we catch a ride with you?"

      China "Go fuck yourselves"

      US/Europe "Damn"

  • by haruchai ( 17472 ) on Tuesday December 24, 2013 @09:34PM (#45779669)

    Given the global fiscal debacle, I wonder what took so long. Countries simply cannot afford to leave that kind of money on the table when they have massive debt and double-digit unemployment.

  • by Trepidity ( 597 ) <delirium-slashdot@@@hackish...org> on Tuesday December 24, 2013 @09:34PM (#45779671)

    When Google sells some ads to an Italian company, it is not really a Bermuda company conducting business. Deeming the transactions to take place in the location of the customer isn't the only possible rule you could come up with, but it's a vaguely sensible one, and at least more sensible than the status quo.

    • Re: (Score:3, Insightful)

      by kqs ( 1038910 )

      So, local Italian companies advertising in Italy will pay an extra "Google Tax", while other EU and multinational companies advertising in Italy won't. Thus, they're making local companies pay more than foreign companies. This is not likely to produce the results that the Italian government wants.

      I'm not sure that this is "more sensible". I don't know how to produce a sensible tax system; it may be that such a system cannot exist. I am convinced that it is impossible to exist under the current US lobbyi

      • by Luckyo ( 1726890 )

        It is far more sensible, because it means local companies are actually able to compete because they are on the same ruleset.

        Right now google is effectively a parasite, punishing local companies that play by the rules and pay to taxes to each country by abusing a legal loophole not to. Such loopholes must be closed asap, preferably while competition still exists. It's going to be much harder to do once google has parasited all competition to death and is the only game in town.

    • Why is it not really a Bermuda company?

      I have been arguing with myself for quite a while over this. Mostly American employees? American founders? American headquarters based in America? Started in America?

      What prevents BP, previously known as British Petroleum, from moving their headquarters to America, where a large part of their production and sales actually happens? Are they still British, or are they now American?

      What if I make a better beer, and want to move to Ireland? Okay this is impossible, bu

    • I don't think it is a sensible idea though.

      Let's say there are a lot of Italian businesses selling to people overseas via the internet. Forcing them to pay tax in the location of the customer means they need to be compliant with the tax codes of all the nations they sell to, so that they can pay corporation tax. Instead of coming up with a singular profit/loss figure, they need to work out profit for each country they sell to so that they can sell an appropriate amount of tax to each country's tax service.

      S

      • It doesn't just seem onerous, it was onerous, which is why the EU single market was forged at great diplomatic difficulty and cost - exactly to avoid the crippling paperwork and bureaucracy that was involved with expanding companies.

        Governments everywhere are passing stupid laws that try to tax foreign entities in a desperate attempt to fix their finances without impacting voters. Trying to tax people who are selling to their voters is a popular idea because it's harder for people to perceive a lack of good

  • Good (Score:2, Insightful)

    by Anonymous Coward

    I expect sociopathic behavior out of corporations, who seek to optimize their income in a shallow way (building up the countries they're in will increase income too, but corporate monetary thinking is very short-sighted) and take advantage of any system that they're in. So governments need to pass laws to prevent that kind of behavior.

    My only concern is that when the laws get too complex, endless loopholes will be found. They need to have a very streamlined definition of corporate income that doesn't leave

    • Yes, corporations are sociopathic while governments are sane. Be careful which team you root for.
  • by ebonum ( 830686 ) on Tuesday December 24, 2013 @09:49PM (#45779731)

    So what prevents Google for closing their Italian office altogether? Simple tell Italian companies, he is a webpage to buy services and an account in Ireland to pay. If you need help, here is a support number in India or some other location. Somehow I doubt Italy can enforce a rule that says companies can't buy an online service from Ireland.
    The nifty thing with the internet is that you can work remotely. Or am I somehow missing the point?

    • So what prevents the government of Italy from mandating the removal of all Google adds from web pages in their country? Simply tell Italian companies if they want to advertise, you advertise here or your customers won't see your adds. It's not like people use HTTPS, now is it?
      • by kqs ( 1038910 )

        So you propose that Italian companies cannot run Italian ads on the largest internet ad platform, but that their international competitors CAN run Italian ads there? THAT is what prevents the government of Italy from doing this.

        Or are you proposing that Italy can tell a US company what to show to Italy? Or something else? I'm not sure exactly what you propose, but I'm sure that it will not happen for long because local Italian companies will complain bitterly if they are put at a disadvantage compared to

    • The law is written to stop Italian companies from buying services from foreign companies, which will seriously hurt Italian companies. Even if Google goes along with this and routes payments via Italy and pays Italian tax, lots of other ad networks won't and it's a competitive business.

  • by the eric conspiracy ( 20178 ) on Tuesday December 24, 2013 @10:20PM (#45779877)

    Really this is a global problem, where an entity can set up an extraterritorial operation and avoid taxation.

    Amazon does it to avoid sales taxes and so forth in the United States. Google and Apple do it to avoid taxes in particular countries.

    Simply these shenanigans will cause states and countries to extend their cooperation across these boundaries. Eventually there will be a national sales tax system, and an international sales tax.

  • Gross receipts tax; money is received in the country/state/locality where it is paid or from where the transaction buyer originates.

    • by kqs ( 1038910 )

      So PepsiCo sets up an Irish office to pay Google for ads worldwide (including in Italy). Local Italian companies are too small to do the same. And Italy is punishing its own companies. Bad solution, I think. I don't know what a good solution is, mind you, but that's not one.

      • by rtaylor ( 70602 )

        A Russian can import goods from China into the United States. They pay duties and other fees at the border of the United States as the goods enter the country; even if they intend to pay Americans to take the product.

        The internet needs some kind of enforced border to ensure duties and other fees are paid on content as they arrive. The ads, in this case, would require payment in order to be presented to an Italian client. The "good" is being consumed by an Italian and taxes/fees should be paid when it crosse

  • A good first step (Score:5, Interesting)

    by PopeRatzo ( 965947 ) on Tuesday December 24, 2013 @11:43PM (#45780203) Journal

    Anything that discourages internet advertising is a step in the right direction.

  • Isn't it against European Union laws on freedom of cross-border trade or what's it called properly?
    • by 0123456 ( 636235 )

      Isn't it against European Union laws on freedom of cross-border trade or what's it called properly?

      I don't know why this has been modded down, since this seems a blatant violation of EU law.

  • This kind of law has other negative side effects. An italian company can't buy an ad sponsorship slot on a blog in a different country; because the blogger is not a multi-national entity --- they won't have a company registered in Italy.

    The potential advertising options for Italian companies just became very limited......

  • Free movement of goods and services?
  • The text of the law (Score:5, Informative)

    by pmontra ( 738736 ) on Wednesday December 25, 2013 @06:29AM (#45781129) Homepage

    This is a non authoritative translation of a part of the law that I believe TFA missed, legal-Italian to plain-Italian to plain-English (as good as I can get it). Italics are mine.

    Online advertising spaces and sponsored links in search engine result pages that can be viewed on the Italian territory during a visit to a web site or when using on online service on landline or mobile network, must be bought exclusively by companies with a registered Italian VAT account. This applies also to the case in which the sale has been made by the means of media centers, third parties and advertisers.

    Think about the implications of the part in italics. Your US company buys an ad in English from Google aimed to the US market. Unfortunately I end up seeing it from my computer located in Italy. Ops, somebody is in trouble now, either you, Google, me or a combination of those three parties. There is nothing in the law about what happens in case of violations and to whom it happens.

    Furthermore TFA missed that the law binds companies like Google to register a VAT account in Italy, not to pay taxes there. They'll end up paying just VAT there, which by the way comes from Italians, not from Google. The law aims at quantifying the turnover of those companies in Italy, which can only be estimated now. Unfortunately the way it's worded makes it difficult to enforce.

    Luckily a motion [giampaologalli.it] (in Italian, Google translation to English here [google.com]) has already been filed to suspend it. For another take on it you can read this Google translated post from wired.it [google.com].

    PS: odd thing to do for me on Christmas morning :-)

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