Reuters once again raises the issue of data monetisation, but above all that of web tax and the consequent risk (now more concrete than ever) of US retaliation. How realistic is this scenario? A hypothesis by Andrea Monti – Originally published in Italian on Italian Tech – La Repubblica
The song remains the same: can Big Tech services be paid for with personal data? If so, should they pay taxes on their value?
The title of the Led Zeppelin song is the best description of what is happening in the low-intensity war between the Italian tax authorities and the Milan Public Prosecutor’s Office on the one hand, and Big Tech on the other. And the answer to the questions is in the lyrics of another song, this time by Bob Dylan, the answer, my friend, is blowin’ in the wind — because despite the time that has passed, no one, neither the legislator nor the independent authorities nor the Revenue Agency, has ever wanted to put an end to the legal issue underlying these events.
The problem is the industrial model based on ‘free’
The industrial model based on the ‘data in exchange for service’ scheme is under eternal attack. Not only does it not allow the option of paying with data instead of hard cash to be defined as ‘free’ — i.e. without consideration — according to the tax authorities, but it has also been deemed so by the antitrust authority and the data protection authority for over 25 years.
Conveniently for all parties, the proceedings brought against Big Tech have so far ended with agreements that have allowed the platforms involved to save time and money, and the tax authorities and the Milan Public Prosecutor’s Office to avoid the risk of a ruling against them, which would have undermined the not exactly solid legal foundations on which they have built the legal framework supporting their accusations. Even if we consider data to be an object with economic value, it is not so clear-cut that taxes should be paid in Italy and not in the US.
The web tax issue returns
In other words, we are faced with the recurring issue of the ‘web tax’ and its de facto application — because, without a law or a ruling, it cannot be imposed by law.
This interim solution, however, creates more problems than it solves. For example, without repeating in detail what has already been written in Italian Tech about the unequal treatment of Big Tech, if the prosecution’s case is upheld, then, for the sake of consistency, tens of thousands of similar proceedings should be opened against all those who have based their business models on the capitalisation of personal data, trusting in the narrative built on the ‘virtual’ and the ‘digital’.
Risk of retaliation: have we reached breaking point?
Similarly, as long as the tug-of-war between the US and Italy/EU on the issue of direct taxation and taxation mediated by tax assessments holds, everything is fine. But, as has already been highlighted on other occasions in Italian Tech, ‘if it were to give way, it would collapse, triggering, for example, a reciprocity mechanism whereby if the EU can sanction a US company, then the United States can claim the right to do the same to any company based in one of the EU countries, thus attacking the national economy and not that of the EU (which does not exist); or, given the threat to a key sector of the US economy, the adoption of even more restrictive measures.’
What at the time appeared to be only possible but not necessarily probable scenarios have suddenly become extremely concrete, given the blatantly punitive nature of the tariffs announced by the US in its relations with the EU. As further proof, the Reuters press release cited at the beginning notes that ‘the issue is likely to be sensitive, given the trade tensions between the EU and the administration of US President Donald Trump’.
What are Brussels’ strategies?
It is quite clear, therefore, that tax sanctions on Big Tech are no longer just a knot to be untangled in the intricate web of Italian tax law, but also represent a ring in which the EU must step up to face the US. And, to continue with the boxing metaphor, given that the preliminary stages are already over and the contenders are in the centre of the ring waiting for the bell, we need to understand whether the Commission’s cornerman has a strategy that will at least allow it to finish the fight on its feet, or whether he is sending his boxer into the ring without giving him even the most basic instructions — head down, hands up — exposing him to the risk of an immediate, quick and, above all, brutal knockout.