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Italy's 'Google tax law' could fall foul of EU discrimination rules

Billion-euro attempt to get more taxes out of web firms may be illegal

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The European Commission has warned that Italy's proposed "Google tax law" would likely break European Union rules on non-discrimination, Reuters reported.

The Italian government first floated the idea of the law last month, which became known as the "Google tax law" for what is seen its obvious target. The rule would require any companies that advertise in Italy to do so through companies with a tax presence in the country. The legislation is clearly aimed at stopping the so-called double Dutch and Irish sandwiches - legal tax dodges made famous by online firms like Google, Apple and Facebook.

Originally, the proposed rule would have applied to firms that sold things online as well, but it was revised this week to exclude products, making it applicable to ad companies only and letting etailers like Amazon off the hook.

The legislation is included in Italy's 2014 budget package, which is due to be voted into law by the lower house today and by the Senate in time for Christmas. Supporters have claimed that the measure could add at least a billion euros a year to the coffers, a much-needed cash injection for the country, which has the second-highest level of debt in the EU after Greece.

Emer Traynor, spokeswoman for Algirdas Semeta, the EU's taxation commissioner, said that the current version of the law could run into trouble with the European Commission.

"We would have serious doubts about the amendment as it now stands, as it appears to go against the fundamental freedoms and principles of non-discrimination set out in the Treaties," she said. ®

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