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Italy’s tax settlements with Web companies to bring in almost €1 billion

by Angelo Mincuzzi

The €306 million settlement signed yesterday between Internet services company Google and the Italian Revenue Agency is the most recent, but it will not be the last. Others on the waiting list include Amazon, the online sales firm founded by Jeff Bezos, which Milan's financial police accused of failing to declare €130 million, and Facebook. Checks by the tax police into the records of the social network giant are underway, but there is still no official measure of the amount to pay.

At the end of 2015, it was Apple who reluctantly played the role of trailblazer, agreeing with fiscal authorities to pay €318 million, the first case in Italy among the big Internet firms.

As the web tax debate is being rekindled, Rossella Orlandi, Director of the Italian Revenue Agency, explained the strange thing that is happening in Italy, a country with the record for tax evasion and maybe also for level of taxation, at least among the main industrial countries, but also capable, at least in this, to point the way forward to other European states.

A few hours before the signing of the “verification with acceptance,” as the Agency calls the agreement, Orlandi said it “represents an essential step forward in the long-term strategy that we are pursuing thanks to major team work,” with the financial police and Milan's prosecutor's office.

On its website, the Italian revenue agency describes a “verification with acceptance” as a procedure on the basis of which a correction of a declared taxable base is made through discussions between authorities and the tax payer. It is then concluded with an agreement signed by both sides.

Advantages for the tax payer include the reduction of penalties, including those linked to financial crimes, and the closure of the dispute, while for the tax agency the benefit is that the company will now pay taxes going forward.

Similar team work was seen two years ago in the Apple case, when investigations by the tax unit of Milan's financial police worked alongside those of the customs agency, coordinated by Milan prosecutors, and in the end linked to activities of the Revenue Agency. That agreement, which resulted in the multinational paying a check for €318 million, was the fruit of a coordination strategy, the steps of which were replicated in the Google case.

Controversy has not been lacking in the past on the size of the figure paid by Apple to close a dispute with the fiscal authorities. It was viewed as too little compared to the business that fills up the coffers of the big Internet players, according to some commentators.

Too little also when compared to the obligations of private taxpayers or of small and medium sized companies, which have to pay the extremely high taxes in full. But during a hearing in the Senate, in April Milan prosecutor Francesco Greco summed it up in a few words: “There are enormous problems during checks and investigations.”

In other words, checking the amount evaded in the huge ocean of the web is almost an impossible task and therefore the agreements reached are a realistic but effective solution. Above all, they pose the basis for something more important: the ruling procedures that will make it possible to scrutinize the taxes that Google and its peers will have to pay from now onward in Italy.