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Italy May Use New 'Tax' to Raise Revenue From Google, Amazon, and Yahoo

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The legislation aims to raise 1 billion euros by making it more expensive for Google, Amazon, and Yahoo to do business in Italy.

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Many of the world's largest tech companies, like Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), and Yahoo (NASDAQ:YHOO), save millions of dollars every year by setting up their European online advertising sales operations in low-tax countries like Luxembourg and Ireland. Google, for example, employs third-party companies that are not based in Italy to serve Google network advertisements for the Italian market. The same goes for Apple (NASDAQ:AAPL) and Amazon. Now, Italian politicians will debate a proposal that would force Google, Amazon, Yahoo, and other companies that advertise and sell online in Italy to employ advertising agencies that pay Italian taxes.

The bill, currently tabled by the center-left Democratic Party (PD), has the goal of raising at least 1 billion euros. Dubbed the "Google Tax," the new levy would not directly tax major tech companies (the Italian parliament has tried that before, without success). Rather, the Italian state would benefit by levying taxes on the extra income of Italian advertising agencies and Internet service providers that Google, Apple, and others would be obliged to work with.

The Chamber of Deputies, the lower house of Italy's Parliament, in session.
The bill was drafted by Francesco Boccia, Chairman of the lower house budget committee. As he said on his website, "We shouldn't be trying to raise resources by hiking taxes on fuel, cigarettes, or small retailers while our online purchases are raising the profits of companies that have no interest in developing our economy."

The "Google Tax" is the latest iteration in a series of proposals made by Italian politicians to curtail the problem of multinationals paying taxes elsewhere. None of the suggested bills have yet been made into law.

The Democratic Party plans to make the "Google Tax" proposal an amendment to the Italian government's 2014 budget, which is currently being debated by parliament. If it passes parliament, the bill will also have to gain the support of Silvio Berlusconi's center-right People of Freedom party to become law.

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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