Italian Lawmakers Are Not Stupid

Say what you want about the Italian Government and their proposal for a “Google tax”, but I find it very unlikely that they are stupid.Google Italia

I recently read an article on the Forbes website entitled “Italy Proposes an Entirely Illegal Google Tax”. Normally, I wouldn’t have thought twice about legislative malfeasance in Italy, but this was from Forbes, the corporate cheerleading, Europe bashing publication that manages to survive only because of its silly annual list of rich people. As suspected, the story of the Google tax is a bit more complicated.

Italy, like many other European countries, are trying to figure out a way to collect taxes from large companies that operate in one European country but do business in the others. As the article points out, there is a problem with this in that the direct collection of taxes violates the single market principle. This is why some articles refer to this revenue collection as a “tax” with quotations.

Companies like Google have found a way to avoid paying national taxes by setting up subsidiaries and shell corporations wherever the taxes are the lowest while at the same having access to the large European market. Many consider this a tax loophole, so Italy’s Partito Democratico is proposing a loophole of its own. In order to advertise in Italy, a company must go through a registered Italian ad agency. The Italian companies would therefore see an increase in revenue which would increase the amount taxed by the government.

Can this work? Probably not. Is it legal? Probably not. So then the Forbes article is right? Absolutely not.

Italy does not exist in a vacuum. It is not the only country upset about the tax loopholes exploited by tech companies. France, which is where the idea of the Google tax was born, is calling for a Europe-wide Google tax. Surely this would satisfy critics who claim that national Google taxes are illegal. The point is, even if the law gets passed, and eventually struck down, it can have an effect on public sentiment throughout the continent.

The proposed Italian law is said to be able to raise €1 billion in tax revenue. This is nothing – about one tenth of one percent of the government’s budget. In other words, Italian lawmakers are testing out the waters and seeing how much leeway they have within the existing European structure.

Criticizing continental European economic policies is a favorite pastime for American and British conservatives who wish to parody that which they disagree with. But to say that Italian lawmakers don’t understand their basic laws is ludicrous. Which explanation seems more plausible?

  1. Italians are stupid and don’t understand their own laws.
  2. Italian lawmakers understand that they are in a difficult situation in terms of national interests and regional law and are pushing the envelope so as to establish new precedents and/or provide exposure for a new regional tax policy.

To call Italian lawmakers stupid is lazy and teaches us nothing about the situation.

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