The Italian Parliament has passed a controversial tax law in the budget which will require all foreign companies to get a VAT number in Italy if they are selling online advertising. The target of the tax is so clear that it was popularly named Google Tax or Web Tax.
The tax was due to take effect from January 1 this year but it has been delayed by the Prime Minister to be effective from 1 July.
The delay in implementation of this tax will give Italy enough time to negotiate with the European Union and abroad about its legality. The opponents of the tax will also get time to get it cancelled even before it sees the actual light of the day.
This new tax is an attempt by the Italian government to circumvent the practice by large internet companies to station their European Headquarter in country where corporate tax rate is very low. Facebook and Google have their headquarters in Ireland and Amazon has in Luxembourg. Their offices in other European countries are treated as doing marketing and sales, which essentially means that they pay little or no tax in bigger European countries.
Sponsors of the tax have said that it could bring in revenues of up to one Billion Euros, however, many commentators have questioned this figure.