The Italian Senate has now passed the “Google Tax” and Italian lawmakers really do seem to be entirely blind to the fact that this law is illegal under European Union rules that cover trade and the establishment of companies. But what’s worse than this is that even if the law were in fact legal it wouldn’t in fact achieve what the proposers are saying that it would. Here’s 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.
Yes, that is, clearly and obviously, illegal under EU laws. You’re just not allowed to discriminate, in law, among people based in different EU countries. So much so that, for example, when the British government wanted to make an order for some new trains it could not favour the UK based company over a German bid. If you’re not allowed to have national preference in government acquisition then obviously you’re not allowed to tell private companies that they must follow some form of national preference.
Italy’s measure is “fairly obviously contrary to EU law,” said Sol Picciotto, an emeritus professor of law at Lancaster University in the U.K.
Sol Picciotto is one of the campaigners associated with the Tax Justice Network. This Google and Facebook selling from Ireland thing is one of the matters that they complain about bitterly. And if they say that this potential solution is illegal then I think we can take it as being true that it is illegal.
And I have been making this point for some time now. And it’s not as if people in Italy haven’t grasped the point. Beppe Grillo got it immediately. We even know that Francesco Boccia, the proponent of this tax, knows about it. For we’ve even got his response to my having pointed it out.
And the way this European system works is that European Union law is superior to national law. It doesn’t matter what the Italian Deputies, or Senators, nor even the President or Prime Minister, say about what the law should be in Italy, if it breaches EU law then it doesn’t stand.
What’s worse than the law being illegal is that even if it were not illegal it still wouldn’t do what its proponents want it to do. For what it says is that Italian advertisers must purchase their internet advertising from a company with an Italian VAT registration. OK: but the problem with this is that this does not then mean that Google’s profits would be taxable in Italy. For the Italian double taxation treaties state, explicitly, that selling through an agent does not create a permanent establishment. And without a permanent establishment in Italy them Google’s profits derived from trading in Italy are not taxable in Italy. So, Google appoints an agent, an agent with an Italian VAT number, and the law is met and still none of Google’s profits from Italy are taxable in Italy.
The Google Tax is actually worse than being an illegal law. It’s an incompetent one.