Italy and US Reject Discriminatory Digital Services Taxes in Joint Statement

In a move that could reshape international digital taxation policies, Italy and the United States have jointly dismissed what they deem "discriminatory" digital services taxes. This development marks a potential shift in Italy's stance on a levy previously criticized by the U.S., as reported by Reuters.

The announcement followed Italian Prime Minister Giorgia Meloni's visit to Washington, where she held meetings with former U.S. President Donald Trump and his running mate JD Vance. According to Reuters, Prime Minister Meloni received a notably warm welcome from Trump, a noticeable departure from the reception other European leaders have experienced recently.

The joint statement underscored the importance of a "non-discriminatory environment" for digital services taxation to encourage tech sector investments. However, the statement did not explicitly mention whether Italy plans to revoke its current digital tax.

Currently, Italy levies a 3% tax on revenue generated by large tech companies that have global sales surpassing €750 million (around $853 million). Despite generating less than €500 million per year, the tax is politically contentious. Given Italy's total government expenditure of over €800 billion, the revenue from this tax is relatively minor.

As Reuters notes, European digital taxes have been a source of tension, particularly for U.S. tech giants such as Google (Alphabet), Facebook (Meta), Apple, and Amazon. The joint statement might indicate a shift toward improved relations over this issue.

Read more: Berlin Opposes EU Move to Tax US Big Tech as Trade Tensions Rise

Within Italy, domestic political dynamics present challenges for Meloni. Some members of her coalition advocate for maintaining or even increasing taxes on international tech firms as a means of boosting revenue without further stressing Italy's delicate fiscal situation. According to Reuters, Meloni must navigate between U.S. diplomatic expectations and pressures from domestic political allies seeking larger contributions from tech giants.

Meanwhile, Italian Economy Minister Giancarlo Giorgetti suggested that tech tax discussions with the U.S. should be handled bilaterally rather than through the broader EU mechanisms. Giorgetti plans to meet with U.S. Treasury Secretary Scott Bessent next week during a G20 summit.

The joint statement also highlighted continued cooperation in digital infrastructure, including welcoming U.S. investment in artificial intelligence and cloud computing projects in Italy. These initiatives aim to establish Italy as a pivotal data hub for the Mediterranean and North African regions.

Amazon Web Services (AWS) has already pledged a €1.2 billion investment in Italy over five years to expand its data center capabilities, highlighting the potential for strengthened economic ties beyond the digital tax issue.

Source: Reuters