Italy intends to take until the end of the year to analyze Facebook parent Meta (META.O) in a tax dispute that could cost the U.S. corporation 870 million euros ($925 million) and be a tech sector test case.
Meta’s access to Facebook and Instagram might have far-reaching consequences for the business.
An Italian audit suggested Meta user registrations were taxed since they involved the non-monetary trade of a membership account for personal data.
The European Public Prosecutor’s Office (EPPO) forwarded Italy’s Guardia di Finanza (GdF) police audit to Milan magistrates, who launched a criminal probe early this year.
Meta’s evaluation phase with the Italian tax office will complete this year with either payment or tax litigation.
Due to the situation’s sensitivity, the highest-ranking Italian tax officers do the assessment, according to a person with direct knowledge. It will shape criminal inquiry.
Meta said it takes its tax obligations seriously and will work with the Italian authorities.
“We strongly disagree with the idea that providing access to online platforms to users should be charged with VAT,” a Meta representative told Reuters in an email.
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Italy’s tax police and revenue agency estimated that Meta would have paid 220 million euros in sales tax in 2021. Eight hundred seventy million euros was the 2015 number.
“The GdF objection would essentially stem from the fact that social memberships, although allowed free of charge, implied the payment of a non-monetary consideration represented by the users’ concession to META’s use of their personal data,” said international tax advisor Sergio Sirabella.
“A direct link between the provision of free membership to online platforms and the data that is harvested from users” would make GdF successful, he said.
“The consequence of this would be that the entire industry sector of digital platforms and the tech giants would have to review how users access data,” said Sirabella, who taught at the GdF’s Economic Financial Police School.
Meta will argue that its services do not directly provide advertisers with customer data.
A source said the EPPO is waiting to see how the Italian case turns out before taking similar steps in other EU countries.
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