October 16, 2019 / 9:17 AM / a month ago

Italy to introduce web tax on digital giants from 2020

FILE PHOTO: U.S. President Donald Trump (C) walks into a welcoming ceremony with Italy's President Sergio Mattarella (2nd R) at Quirinal Palace in Rome, Italy May 24, 2017. REUTERS/Jonathan Ernst/File Photo

ROME (Reuters) - Italy approved a new tax on digital companies, including U.S. tech giants, as part of its 2020 draft budget on Wednesday, a move that could draw threats of retaliation from Washington.

The levy, due to be introduced from next year, will oblige companies such as Facebook (FB.O), Google (GOOGL.O) and Amazon (AMZN.O), to pay a 3% levy on internet transactions, according to a text of the draft budget.

Washington has repeatedly said the levy unfairly targeted U.S. firms. A senior U.S. official said President Donald Trump was ready to threaten retaliation when he meets Italian President Sergio Mattarella in Washington on Wednesday.

The Italian scheme is expected to yield about 600 million euros ($662 million) a year, sources told Reuters on Monday, as Rome tries to find alternative revenues that will allow it to avoid a scheduled increase in sales tax.

Italy and other European Union members have long complained about the way web giants collect huge profits in their countries but pay only a few million euros in taxes each year. But the EU has so far failed to agree as a bloc on how to tax the firms.

France and the United States reached a deal in August to end a standoff over a French tax on big internet companies, with France repaying companies the difference between the French tax and a planned mechanism being drawn up by the OECD.

For now, the companies can book profit in low-tax countries, such as Ireland and Luxembourg, no matter where revenue originates.

Italy’s plan is broadly in line with proposals from the OECD, which last week urged governments to redraw rules for taxing global giants.

Reporting by Giuseppe Fonte; Writing by Giulia Segreti and Francesca Piscioneri; Editing by Valentina Za and Edmund Blair

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