Italy passes ‘Google tax’ for Internet advertisers

The new measure forces Italian companies to purchase their Internet ads from companies based within the country

For all global companies, advertising is a necessary part of corporate strategy, and knowing the rules surrounding advertisements is crucial for any in-house legal team. Advertising in, say, Australia isn’t bound by the same guidelines as advertising in the United States, but for the most part, the rules and regulations are similar.

Italy, however, is prepared to throw a giant monkey wrench in that notion. On Dec. 23, Italy’s Parliament passed a “Google tax,” which forces Italian companies to purchase their Internet ads from companies in Italy rather than tax havens such as Ireland, Luxembourg and Bermuda.

The new law runs counter to rules in place by the European Union (EU) — of which Italy is a founding member — regarding non-discrimination over commercial activity, lawyers told Bloomberg. However, the fast action by Italy’s Parliament could spark action around the globe.

In July, the Organization for Economic Cooperation and Development (OECD) announced that it would begin fighting methods from Google, Apple and other technology companies that shift advertising profits into tax havens. According to Bloomberg, this shift causes the U.S. and EU countries over $100 billion per year.

Sol Picciotto, an emeritus professor of law at Lancaster University in the U.K., told Bloomberg that “fairly obviously contrary to EU law,” Italy’s action “will put further pressure on the OECD to sort it out.”

So do counsel need to beware of Italy’s action spreading to the U.S. and elsewhere? That remains to be seen. But as of now, the measure does not hold full approval even within Italy itself.

Carlo Alberto Carnevale-Maffe, a professor of strategy at Bocconi University’s School of Management in Milan, told Bloomberg that the law is the “wrong answer to the right problem.” He said, “It’s driven by finding excuses for the Italian government’s fiscal laziness and fiscal profligacy, and needing new tax revenues. And the second thing is to protect the interest of traditional publishers.”

The EU is not particularly happy with Italy’s solution either. European Commission spokeswoman Emer Traynor said, “At first glance, we would have doubts about the amendment as it now stands, as it appears to go against the fundamental freedoms and principles of non-discrimination. We’d encourage the Italian government to ensure any new legislative measures they adopt are fully compatible with EU law.”

 

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Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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