Demonstrating that they are completely out of touch with the mood of the country, and that they continue to see government as a cash cow to be milked, the Italian senate has moved to protect Silvio Berlusconi’s media empire from internet competition.
Italy’s Parliament today passed a new measure on web advertising, the so-called “Google tax,” which will require Italian companies to buy their internet ads from locally registered companies, instead of from units based in havens such as Ireland, Luxembourg and Bermuda.
While in many ways this is seen as a way of curbing the tax avoiding antics of Google and Apple, which like to claim they are based in Ireland and Luxembourg, it is more about protecting Berlusconi’s media empire from internet intrusion.
While many countries have seen the internet as an important tool for business, Italy has refused to invest in it and the only backbone provider Telecom Italia is years behind the rest of the EU. Berlusconi has sued Google in the past for daring to run his piss-poor telly shows on YouTube. The weakened internet has meant that the television industry has not had to think about changing its formats for years and is still running 1970s style comedy variety performances filmed in barns.
Needless to say the tax has stirred controversy. The law violates European Union laws regarding non-discrimination over commercial activity. Google could have it spiked the moment it can lodge an appeal in Brussels. One of the good points about the EU is that you cannot discriminate, in law, among people based in different EU countries.
But what makes matters worse is that the law does not do what the Berlusconi’s people claims it does – stop tax evasion.
It says that Italian advertisers must buy their internet advertising from a company with an Italian VAT registration. It does not mean that Google’s profits would be taxable in Italy – the local law says that selling through an agent does not create a permanent establishment. In addition, without a permanent office in Italy them Google’s profits derived from trading in Italy are not taxable in Italy. All Google will have to do is appoint 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.
All this will do is annoy Google for the five minutes it takes to appoint an Italian agent. Even then it is likely to be destroyed by the EU.
Once again, it is an example of the Italians trying to do something that looks good to solve their crisis, but lacking the bottle to do anything significant to tackle a real problem. If anything all this will do is delay the march of the internet for a few minutes in time for Telecom Italia to crash in a screaming heap.