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Italy could extend its web tax if global minimum tax deal fails

By Giuseppe Fonte

ROME (Reuters) - Italy could maintain and revise its domestic digital services tax if an international deal over how to share taxing rights on large corporations collapses, Economy Minister Giancarlo Giorgetti said on Wednesday.

The global minimum tax agreement is aimed mainly at U.S.-based digital giants, with the first pillar of the accord aiming to reallocate taxing rights on about $200 billion in profits from the companies to the countries where they do business.

Addressing parliament, Giorgetti said the OECD was working hard to overcome sticking points so that a multilateral signing convention with all countries involved could take place in June.

Talks however appear "increasingly problematic given political-electoral dynamics in some major countries," Giorgetti added, referring to the United States, which is struggling to ratify the deal.

As president of the Group of Seven major democracies this year, Rome is trying to play a role in reviving the talks.

"If a multilateral deal proves impossible, the government will consider retaining and modifying its own digital tax," Giorgetti said, adding it will "take account of the framework of international relations."

Italy's 2019 budget introduced a 3% levy on revenue from internet transactions for digital companies with sales of at least 750 million euros, at least 5.5 million euros of which are effected in Italy. Rome raised around 390 million euros ($423.42 million) in 2022 through the scheme.

Should the first pillar of the talks collapse, Italy could strengthen its own tax by increasing the number of companies that have to pay it, a source familiar with the matter said.

This would require an agreement with the United States, the source added, as Washington has threatened retaliatory tariffs over unilateral digital services taxes in Europe.

These retaliatory tariffs are currently frozen until June under a trade truce agreed last month between the U.S. and five European countries.

The U.S. Trade Representative's office (USTR) had previously threatened 25% tariffs on more than $2 billion worth of imports from Italy, Austria, Britain, France, Spain and Turkey, from cosmetics to handbags.

($1 = 0.9211 euros)

(Reporting by Giuseppe Fonte; Editing by Alexandra Hudson)