Italy’s Digital Services Tax

According to cep economist Eleonora Poli, in Rome: “Such a levy has the potential to trigger US retaliatory measures that Italy’s economy cannot afford”. The cep researcher emphasises that, in this context, it is essential to push for a global agreement within the OECD but at least at European level (EU) to find a harmonized and joint solution for digital taxation that benefits both sides and reduces trade disputes.

The growing significance of the digital economy, which in just a few years has reached 15.5% of global gross domestic product (GDP), has revealed significant limitations in traditional tax systems which are based on the physical presence of a company in a specific region or country. Over the past decade, the OECD has been working with more than 130 countries to negotiate a framework for changing how and where large digital companies pay tax.

The OECD-led initiative has paved the way for attempts by individual countries to introduce their own national digital services tax, which could have several geopolitical and economic consequences.

Italy introduced a Digital Services Tax (DST), also known as the “web tax,” back in 2019, targeting large providers of digital services. The latest proposal for a new web tax, set to take effect in 2025, originally aimed to include small and medium-sized enterprises (SMEs) as well. “SMEs are the backbone of the Italian economy, so this plan should also be abandoned,” Poli recommends. More broadly, the EU should strengthen its digital sovereignty.