Google’s tax dealings are back in the news this week.
While Italy has reached an agreement with the American tech giant on back taxes owed, Austria is pondering whether or not to apply an innovative levy to digital services offered by companies like Google and Facebook.
Italy and Google Reach a Tax Deal
American tech giant Google announced this week that it has reached an agreement with Italy’s tax authorities over the company’s tax bill.
According to Fortune, Alphabet, Google’s parent company, has been “accused of avoiding taxes by booking income earned in higher-taxing European markets through a unit based in low-tax Ireland.”
Figures released by Italian tax authorities for the four years following 2009 suggest that Alphabet has skipped out on paying taxes on roughly 1 billion Euros in revenue in the country.
Additionally, writes Sarmistha Acharya in the UK’s International Business Times, “about €600m of royalties should have been revealed to the tax authorities and have faced a tax demand of about €200m.”
According to the parties involved, Alphabet has agreed to pay the Italian government 306 million euros.
Part of this agreement also includes reworking “Google's tax practices to ensure it pays tax on Italian-sourced income.”
More importantly, as reported by Angelo Mincuzzi in Il Sole 24 Ore, “the agreement—thanks to investigations by Milan's financial police—should conclude with the recognition of Google's permanent establishment in Italy, a condition that will allow the tax authority to regularly collect taxes due in the next years.”
A spokesperson for the American company said, “Google complies with the tax laws in every country where we operate. We are continuing to work with the relevant authorities.”
Furthermore, Google said that the firm remains committed to Italy and “will continue to work to contribute to the growth of the online ecosystem in the country.”
Italian tax authorities expressed their satisfaction with the end result, confirming the country’s “commitment to pursue careful fiscal checks on the Italian operations of web multinationals.”
Italy’s tax agency also announced that it would engage in further discussions with Google to find ways to implement “correct taxation” of the American company’s operations in the country moving forward.
Finally, it said following this decision, “With Google a process will be kicked off to come up with preventive agreements for correct taxation in Italy in the future for operations that regard our country.”
As part of this effort, Italy has also been looking into the tax practices of other Internet-based operations such as Airbnb and Amazon, the latter a company that purportedly avoided more than $140 million in taxes during recent years.
Austria Ponders Taxing Digital Services
Austria revealed last week that it’s considering taxing digital transactions between Internet companies like Google and Facebook and the country’s Internet users.
Andreas Schieder, the Social Democrats parliamentary head, believes “a value-added tax could be imposed” on the exchange of information between social media giants like Twitter, Google and Facebook and its users.
More specifically, said Schieder, “The business transaction that’s going on here is that users are paying with their personal data… The business model of those internet companies is based on massive revenues that are generated with the help of those data.”
As explained in Bloomberg Technology, these amendments come as part of a push to revolutionize Austria’s tax code and “[close] loopholes that allow ‘aggressive tax planning’ and corporate tax avoidance, which cost the Alpine country as much as 1.5 billion euros ($1.6 billion) a year, about a fifth of its annual corporate tax revenue.”