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The Headline

Italy imposes new tax on Big Tech

The Grind

Italy's parliament this week passed a new tax that will affect large tech companies like Facebook and Google beginning January 1st.

The tax imposes a 3% levy on the digital revenue of tech companies with more than $831 million in global revenue and at least $6 million in revenue in Italy.

The tax is nearly identical to one passed by France in July following the European Union's failure to agree on a uniform digital tax for the entire bloc.

The new taxes are sure to complicate global efforts to formulate appropriate tax policies for Big Tech amid widespread complaints that American tech companies aren't paying enough taxes to countries in which they operate.

The Details

US negotiators for months have been working with the Organization for Economic Cooperation and Development think tank (OECD) on a global solution to avoid overlapping taxes on American tech companies.

This month, US Treasury Sec. Steven Mnuchin voiced "serious concerns" about the tentative deal and proposed a system that would allow companies to choose the current system over the OECD-brokered rules.

"It's choppy waters. It's difficult," says OECD official Pascal Saint-Amans. "The first feedback we've had [is] that optionality may not be welcome, but it's the US position and no one can ignore the US position."

Big Tech supports a global tax solution over the kind of taxes imposed by Italy and France.

Under current rules, American tech companies pay the majority of their taxes in the United States because that is where most of the products are designed.

"At issue are decades-old rules that generally allocate corporate profit for tax purposes based on where value is created," reports the Wall Street Journal. "But modern multinationals...can sell their products across borders in ways that leave little taxable profit in a country where those products are consumed."

France and Italy have promised to repeal their taxes if and when the OECD reaches a deal.