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The initial examination of Facebook parent firm Meta in a tax lawsuit, which might result in a bill for the US business of over 870 million euros ($925 million or about Rs. 7,609 crore) and serve as a test case for the internet industry, is anticipated to take Italy till the end of the year.
Even while it’s a small amount for a business that generated more than $32 billion (approximately Rs. 8,225 crore) in revenue last year, the lawsuit might have far more significant effects on the sector since it depends on the way Meta gives users access to platforms like Facebook and Instagram.
The dispute arose from an Italian audit that alleged Meta user registrations would be considered taxable transactions since they indicated a non-cash exchange of a membership account for the user’s personal information. The European Public Prosecutor’s Office (EPPO) forwarded the audit, which was designed and executed by the Guardia di Finanza (GdF) police in Italy, and Milan magistrates started a criminal inquiry early this year.
This sparked a conversation between Meta and the Italian tax authority, known as the assessment phase, which will come to a conclusion this year either with the firm accepting payment or with the beginning of a tax dispute. Due to the sensitivity of the topic, the evaluation, according to a person with firsthand knowledge of the situation, involves the highest senior Italian tax officials. How the criminal inquiry is conducted will depend on its conclusion.
According to Meta, it pays all taxes owed in the nations where it conducts business, takes its tax duties seriously, and will fully cooperate with Italian authorities.
A Meta representative told Reuters via email that the company “strongly disagrees with the idea that providing access to online platforms to users should be charged with VAT.”
STRAIGHT LINK?
According to a forecast developed by Italy’s tax police and revenue agency, Meta would have been required to pay the nation’s sales tax in the region of 220 million euros in 2021. The amount was approximated at 870 ($925 million or nearly Rs. 7,609 crore) million euros for the period before to 2015.
According to international tax advisor Sergio Sirabella, “The GdF objection would primarily stem from the fact that social memberships, although permitted free of charge, implied the payment of a non-monetary consideration represented by the users’ concession to META’s use of their personal data.”
He said, “A clear relationship between the offer of free membership to online platforms and the data that is acquired from users would be necessary for the GdF method to succeed.
Sirabella, who has given lectures at the GdF’s Economic Financial Police School, continued, “The result of this would be that the entire industrial sector of digital platforms and the tech giants would have to reassess how users access data.
The defence of Meta will be based on the claim that there is no connection between its offerings and the availability of data that may be used by advertising to target certain consumer groups. According to a person with knowledge of the situation, the EPPO is awaiting the resolution of the Italian case before determining whether to take similar action in other member states of the European Union.
