La “Google tax” italiana. Regime fiscale italiano ed e-Economy europea
Questo articolo analizza le misure introdotte nel Testo Unico IVA sulla pubblicità online con la cosiddetta “Google tax”. Sebbene la “Google tax” sia stata infine abrogata, un attento esame del suo profilo giuridico e fiscale in relazione ai principi sottesi sia alla normativa e alla Carta costituzionale italiana che ai valori europei, specialmente alla luce dei diritti e delle libertà fondamentali sanciti dall’Unione, fornisce principi guida per future iniziative legislative nel settore emergente dell’economia digitale.
This paper analyses the measures introduced within the Italian VAT Statute dealing with online advertising through the so-called “Google Tax”.
Although the “Google Tax” has finally been repealed, an in-depth analysis of its legal and tax aspects in connection with both national and European rules, the EU fundamental freedoms and rights, and the Italian Constitutional principles, provides interesting guidelines for future legislative initiatives in the emerging area of digital economy.
Keywords: constitutional principles, online advertising, digital economy, Google tax, EU, fundamental freedoms, fundamental rights
Information and communication technologies have a large influence on the European economy: Internet-wise businesses open up markets were traditional operators stumble, while consumers benefit from lower prices and more choice. At a moment when Europe demands growth  and growth also implies improvements to the free movement of goods, services, people and capital within Europe’s Single Market , the free movement of digital services and a stronger Digital Single Market  as well seem a necessary part of any plan that aims at succeeding.
It is not by chance that the European Commission supports the Digital Single Market as one of the seven pillars of their Digital Agenda for Europe, with a stated goal of moving 50% of the European customers to online commercial transactions by 2015 .
At the same time, the activities of many of the big Internet players such as Google, Amazon, Apple, Facebook, or those of smaller emerging new media firms pushing innovative business models, are illustrating how at times the traditional way of collecting taxes  can be easily sidestepped, with a negative impact on public revenues. There is no need of creativity here: very often, Internet-based service companies are taking advantage of loophole opportunities provided by old national taxation systems and obsolete European rules to obtain a more favorable tax treatment. Google located its headquarters in Ireland , to profit from lower taxation, while Skype has offices in Luxembourg. These companies perform in the rest of Europe, Italy included, only ancillary activities that do not generate in and by themselves useful taxable income: in the specific area of intervention of the “Google Tax”, online advertising, all of the revenue is taxed in the country where such entities have their headquarters .
This has led to various domestic proposals to change the ways on how such transactions and companies are to be taxed , not a surprising turn of events given how many countries deal with high levels of public debt and tremendous pressure to collect more tax revenue . Alternative taxation forms and controversial approaches to taxation for the digital economy have been discussed and introduced, sometimes repealing already approved acts, all over Europe, often introducing, because of their local and non-harmonized impact, more issues than they solved. The adoption of a common European single policy for these specific issues is becoming crucial.
In the light of national and European principles, this paper discusses the so called Italian “Google Tax”, or “Web Tax”, initially adopted, then procrastinated, and finally repealed by the Italian government, as noteworthy because of its fiscal policy implications and larger significance in today’s European landscape. The possible down sides of the Italian approach as a national approach are examined in detail, and the analysis is therefore limited to the VAT provisions and does not include the examination of art. 1 par. 177 and 178 of the Stability Act, Legge 27/12/2013 no. 147, the former dealing with transfer pricing issues for purposes of income taxation, and the latter with the purchase of online advertising services and ancillary services transacted through either a bank or post office account for general accountability.
The paper introduces the general topic first, moves on to describing the Italian disposition, then proceeds with the analysis and review of the provisions, focusing on whether they pose a threat to EU law and national constitutional principles and if this threat might be justified somehow. Finally, conclusions are drawn.
2. The Google Tax
Italy has initially approved, and then repealed, a much disputed act concerning advertising services acquired online and online advertising spaces or sponsored links appearing in results pages provided by search engines and viewable in Italy through a fixed line or mobile devices and network. The regulation mandated for such services to be purchased exclusively through entities registered in Italy and having a VAT Italian number, even if the transaction was concluded through media centers or third-party operators .
This new disposition was introduced in the Italian 2104 Budget Act, with the actual provision included in the Stability Act . Then, according to art. 1(1) of the Law Decree 30/12/2013 no. 151 , the entry into force of this new fiscal measure was postponed from January 1 2014 to July 1 2014 . The Senate maintained the prorogation was justified by the need to verify the compatibility of the new measure with EU law .
Nevertheless, on February 26 2014 the Government announced its decision to not convert the decree , factually killing the disposition. Then, with Law Decree no. 16 of March 6 2014, the Italian Government definitely repealed the new rules. The Parliament converted the Law Decree into ordinary Act no. 68 on May 2 . Regardless of the final abrogation, this disposition is of extreme legal and fiscal interest, as it allows to shed some light into the possible consequences in respect to the general principles of tax law of similar domestic approaches to solving EU and international matters.
The original provision introduced a new article in the VAT Italian ACT, art. 17a, stating the mandatory requirement for foreign companies selling online advertising to a taxable person in Italy of obtaining an Italian VAT number:
«In the Republic Presidential Decree 26 October 1972, no. 633, after Article 17, the following is inserted:
1. Article 17(a): 1. The taxable persons wishing to buy advertising services and sponsored online links, through also online media centers and third-party operators, are obliged to purchase them from the holders of a VAT number issued by the Italian tax administration. 2. The online advertising spaces and sponsored links that appear in the results pages of search engines (search advertising services), viewable on the Italian territory during the visit of a website or the use of an online service through landline or network and mobile devices, must be purchased exclusively through entities, such as publishers, advertising agencies, search engines or other advertiser, registered for VAT issued by the Italian tax administration. This provision shall also apply in cases where the sales transaction has been carried out through media centers operators and third parties advertisers».
Previous drafts were also applicable to goods and services purchased online. This idea was abandoned , and the final proposed disposition focused on advertising services only, rather than on electronic commerce as a whole, albeit remaining highly debatable and controversial even in this new reduced operative version .
The goal of the new rule being introduced was simple: increase tax revenue on Italian soil. It intended to achieve this goal by mandating Internet-based foreign companies operating in Italy and selling online advertising visible in Italy to do business through an Italian VAT number and consequently, as far as tax regulations are concerned, through a permanent establishment in Italy .
Immediate suspicion was raised that if approved, this regulation would violate not only a number of prime principles established in the Italian Constitution, but also EU law under several aspects, first and foremost by forcing foreign companies to set up permanent establishments in Italy in order to do business, certainly a blow to the EU fundamental freedoms and principles of non-discrimination .
2.1. Online Advertising Services and Search advertising Services
Even if the phrasing of the provision is unnecessarily ambiguous and offers the side to criticism in its all-too-easy using or dropping of “online” between sentences, it is safe to state that the first paragraph applies to “online advertisement services”, and the second one to “search advertising services”. These can be subsumed to be the subset of onlineadvertisement services provided to visitors after they perform a search, as opposed to simply visiting a page or website . Whatever applies to the former also applies to the latter.
Doctrine stresses how both the Italian VAT Act and the Italian tax system supposedly lack a necessary definition of online advertisement services . We find a mention in the European VAT Council Regulation no. 282/2011 though: while explaining the list of electronically supplied services contained within Directive 2006/112/EC , the Regulation classifies the provision of advertising space including banner ads on a website/web page as electronically supplied services . Art. 7 of the same text defines electronically supplied services as including
«services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology».
Still, the VAT Directive, the VAT Council Regulation no. 282/2011, and the VAT Council Regulation no. 1042/2013 do not provide, strictly speaking, a definition of advertising. To understand what services were to be covered by the Italian provision, then, we have to proceed by means of interpretation and start from the characteristics of traditional advertising first.
The ECJ provides a little guidance in the Belgian Electronic Sorting Technology case : the Court there recalls the definition contained within the Directive on advertising  as including “the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations” . The Court intends such definition broadly, not limited to traditional forms of advertising only but including also different types of promotional messages . In the Commission v French case, the ECJ also stated that advertising is a Community concept which must be interpreted uniformly in order to avoid instances of double taxation or non-taxation which may result from conflicting resolves , and for this reason framed the concept rather broadly within the field of VAT:
«the concept of advertising necessarily entails the dissemination of a message intended to inform consumers of the existence and the qualities of a product or service, with a view to increasing sales. Although that message is usually spread, by means of spoken or printed words and/or pictures, by the press, radio and/or television, this can also be done by the partial or exclusive use of other means» .
In terms of online advertising services, the source is the eCommerce Directive . Recital 18 explicitly mentions commercial online communications as information services. Furthermore, art. 2 (f) of the same Directive defines commercial communication as:
«any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person pursuing a commercial, industrial or craft activity or exercising a regulated profession».
Finally, according to recital 29, the Directive supplements applicable law in the field of information services . The definitions of traditional advertising services and online advertising services are thus consistent, and coordination between the two Directive does not present specific interpretation issues. Furthermore, both Directives have been implemented within the Italian legal system , while Case law of the ECJ are directly applicable in national law-making, rendering an additional, national tax-law-only, definition of online advertising services unnecessary and problematic, a way to introduce more complexity into the legal framework without providing additional clarity.
On the other hand, an explicit reference within the VAT EU frameworks to the Directives on Advertising and e-Commerce on this specific point would be highly desirable, as it would make the necessity to proceed by interpretation void.
2.2. VAT Place of Supply
The first paragraph refers to any Italian company that buys online advertising and specifies that they can only legitimately purchase such services from an entity identified by a VAT number issued by the Italian tax administration. It is worth considering that the repealed provision was above all conceived specifically for B2B transactions, and that Council Implementing Regulation 282/2011 , in its art. 11, positively prescribes the characteristics of the fixed establishment as having a sufficient degree of permanence, a suitable structure in terms of human and technical resources , and the capacity to receive and use the services supplied to it for its own needs or to provide those services it supplies.
The same art. 11, third paragraph , expressly excludes that a VAT identification number is in itself sufficient to conclude that a taxable person has a fixed establishment in the territory of a state .
Furthermore, the rule does not alter neither the provisions on territoriality which are applicable to online advertising, nor introduces an exception to the rules on the application of VAT with respect to services rendered by non-residents to Italian taxable persons. Article 17(2) of the Italian VAT Act gives guidance on the obligations relating to the supply of goods and services provided on the territory of the state by non-residents in respect of taxable persons established in the territory of the state: these duties are fulfilled by the taxable persons established in the territory of the state . Additionally, according to the Italian VAT Act, online advertising services provided by a non-resident taxable person to a taxable Italian person (B2B) are regulated by the territorially provisions on B2B, again prescribing taxation in the consumer’s place of establishment .
In conclusion, as far as VAT is concerned, the repealed disposition as such would not have modified the place of supply for online advertising services .
The second paragraph narrows the field to advertising only visible on the Italian territory and specifies that such advertising must be purchased exclusively through entities, such as publishers, advertising agencies, search engines or other advertiser, registered for VAT by the Italian tax administration.
This measure would have forced any business specifically selling search advertising services through the World Wide Webbut visible in Italy to obtain an Italian VAT position, even if their activities were carried out outside of Italian territory. The only fiscally relevant trigger being visibility, this disposition would mandate an hypothetical Chinese seller part of such a transaction to establish a permanent establishment in force of their being assigned an Italian VAT number. Any literal interpretation and application of this rule of law would create paradoxical results, since an indefinite number of international companies whose advertising is viewable in Italy would have to file for an Italian VAT number in order to comply.
3. Breach of Competition
Another issue that need to be investigated is whether the conditions outlined the repealed disposition were somehow permissible under both the Italian Constitution and EU law.
The Italian Constitution, art. 41(1), upholds that private economic initiative is free: limitations can be only provided by the law. Doctrine interprets this freedom as not being restricted only to the determination of whether to undertake a business enterprise or not, but to its organization as well. Economic initiative is framed as the freedom to decide what to produce, how to produce it, when to produce it, and where to produce it . Freedom of competition is protected as well, with doctrine maintaining it has always been considered a general principle of the Italian legal system . While art. 41 of the Constitution recognizes the freedom of economic initiative, art. 117 (2)(e)  of the same Charter, explicitly protects competition.
Competition not only limits regional legislative competence, but it is also connected to the exclusive legislative power of the state, whose burden is to promote good competition and refrain from policies that restrict competition. Very clearly, the Italian Constitution considers competition a value.
This is also in the interest of potential entrepreneurs: the Italian Constitutional Court has further maintained that this protection extends to the guarantee of equal treatment and measures among businesses, including a lack of obstructions for new players who want to enter the field , and has stated more than once that all legal frameworks regulating competition have the ultimate goal of promoting an open market economy through free competition . It is to be noted that this domestic notion, as per art. 117 (2)(c) of the Italian Constitution, certainly reflects a concern that we also find in EU Law.
On the other hand, a provision which imposes the necessity, for foreign digital companies selling online advertising, of having an Italian VAT number is an attempt to apply to non-Italian enterprises the Italian tax rules, even when different EU tax principles would be applicable in the specific case, potentially harming both producers and consumers in the process. Producers, directly, by unbalancing the playfield, and consumers through the artificial restrictions imposed to their freedom of choosing as they could only buy from those who hold a VAT Italian number . While it could be argued that restrictions are what laws are about, laws cannot be in breach of the fundamental values of the Constitution.
3.1. Freedom to Conduct a Business
Advertising services is considered as to be included into the area protected by the principle of freedom of economic initiative  and on the freedom to conduct a business as per art. 16 of the Charter of Fundamental Rights of the European Union. In this field limitations and restrictions can be admitted for superior reasons of public interest . EU legislation regulates advertising in electronic media in accordance with the case-law of the ECJ, as part of the system of fundamental freedoms. On the one hand, advertising is considered to be a service, and national laws may not therefore restrict the freedom to provide such a service, even if they may regulate it under certain circumstances, for example to protect the public interest. Such interventions should not be disproportionate in respect to their intended objective , and should not go beyond what is necessary to achieve it .
In the Canal Satélite Digital case , the issue brought before the Court was as to whether national registration requirements would configure restrictions to the free movement of goods and services. The ECJ maintained that they were neither justified nor necessary in pursuing the aim .
In the case of the “Google Tax”, the issue is whether an Italian disposition may hinder or impede, for tax revenue and collection reasons, the freedom of establishment or the freedom of providing services within the EU. If so, whether this restriction may be justified.
Freedom of trade constitutes one of the most basic human liberties: an open market based on free competition  is one of the core EU assets , and the Treaty protects the free movements of goods, services, persons, capital, related payments, and non-discrimination as fundamental individual rights . The ECJ maintains that
«it should be borne in mind that the principles of free movement of goods and freedom of competition, together with freedom of trade as a fundamental right, are general principles of community law of which the court ensures observance» .
A fundamental right ought to be safeguarded . The market freedoms within the Treaty expand from the original freedom of trade and freedom to conduct a business, and these originate from the basic right to liberty as stated within the Charter of Fundamental Rights of the European Union . These introduce the complementary government duties to provide and sustain an internal market without frontiers in which the free movement of goods, workers, services, establishment and capital can be ensured as per EU law .
In its original meaning, this principle of free movement protects a general freedom of cross-border economic activities . A fundamental role is played in this context by non-discrimination on the grounds of the nationality principle . The ECJ considers this a fundamental principle of the EU , and generally interprets it as an equality of treatment resulting in the fact that
«comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified» .
The principle is in place to prevent
«not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result» .
Thus, avoiding discrimination and ascertaining equal treatment for all players is an indispensable step to achieve the goals of the internal market as set out by the EU. This basic criterion is also applicable to national measures that might negatively influence the exercise of a fundamental freedom, since domestic provisions can affect intra-Union trades in goods and services , or that de facto may intrude on the exercise of any of the fundamental freedoms in a way that is prohibited by the Treaty .
Indeed, restriction is not discrimination, but they do proceed alongside, as each fundamental freedom delineates both a non-discrimination and a non-restriction profile, and these both play a role in the realization of a successful internal market .
Restriction especially weighs in significantly in direct taxation when national tax measures are applied without any dissimilarity on the basis of a criterion, and when the concept of discrimination proves to be insufficient .
The ECJ has in some cases ruled that domestic measures were not discriminatory but nevertheless in breach of the fundamental freedoms of the Treaty. Restrictions are an impediment, but they can also become barriers : this is the case whenever «a Member state adopts regulations that have as a final effect to obstruct or restrict the freedom of establishment of non-national companies in the territory of the state . The situation is the same when it comes to the freedom of providing services» .
Restrictions make the performing of cross-borders EU transactions less attractive and hinder, without impeding completely, the exercise of fundamental freedoms guaranteed by the Treaty. It is matters of worse or less favorable treatment granted to EU transactions in comparison to domestic ones. As opposed to discrimination rules, those handling restrictions do not need comparable situations, but they are applicable erga omnes .
Furthermore, freedom of establishment is also not only related to illegitimate internal provisions that discriminate, directly or indirectly, between citizens and foreigners, but also to all dispositions that have the effect of preventing, impeding or discouraging the exercise of such right within the territory of another Member state.
Fundamental freedoms encompass the non-discrimination clauses, which are equality based: on the other hand, prohibition of restrictions are better defined as liberty rights .
In respect to the freedom of establishment, protection against discrimination comes from the idea of market equality while protection from restriction comes mostly from that of market access . Market access is a core concept in internal EU market law : in economic terms, it identifies the ability for an economic actor to gain access to a market on an equal footing with other economic operators . Free movement provisions have to be compliant with it .
A barrier to market access can be a circumstantial barrier to entry or a restriction to entry, an institutional obstacle such as legislation, tariffs, quotas, or taxation. Advocate General Fennelly pointed out in the in Volker Graf case that
«(t)he imposition of conditions regarding entry to the market or the taking up of economic activity is itself sufficient to establish the existence of a restriction» .
Italian law appears thus to be in clear breach of European Union rules concerning the Single Market and the free movement provisions , since imposing the requirement of an Italian VAT number for foreign companies is a clear legislative attempt to force them setup a permanent establishment in Italy to tax, in Italy, any income deriving from online advertising services, insomuch as to prevent what is perceived as tax avoidance and evasion. Furthermore, it made cross-border and EU transactions of online advertising more difficult and potentially more expensive in comparison to purely national ones.
Nevertheless, restrictions and discrimination may have grounds for justifications with similar rationales , usually used when national measures are in conflict with the fundamental freedoms . Superior reasons of public interest may to all effects allow Member states to proceed even in the face of discrimination or crippling restrictions, but these are strictly limited in ratio and number ratione materiae to matters of public policy, public security, public interest , or public health . The ECJ interprets these exceptions very narrowly  as well, consistently upholding that
«restrictions must be justified by imperative requirements in the general interest, be suitable for achieving the objective which they pursue and not go beyond what is necessary in order to attain it. They must in any event be applied without discrimination» .
3.2. Tax Avoidance and Evasion
Can any such measures, restrictive as they are of the fundamental freedoms, be justified? The aim of the Italian “Google Tax” regulations was to prevent the possibility of tax avoidance and evasion : if this were the case, there would be grounds to consider them legitimate; If not, incompatibility with the EU legal framework would loom large.
The ECJ maintains that economic goals cannot support public policing according to the Treaty , nor can an economic goal be a justification for discrimination based on the place of establishment. Such discrimination can only be justified on the grounds of general interest, and that does not include economic aims .
If economic aim is to be excluded, can tax evasion or tax avoidance as referred to in the text of the disposition provide some level of justification beyond generic economic aims to the norm? It is a difficult proposition. The ECJ has interpreted the risk of tax avoidance very restrictively, and has refused early on to consider it as a valid basis for justification. In the Avoir fiscale case , the Court states that
«the risk of tax avoidance cannot be relied upon in this context. Article 52 of the eec treaty does not permit any derogation from the fundamental principle of freedom of establishment on such a ground» .
On the other hand, prevention of abuse has been considered valid grounds for justification in direct taxation . In the ICI case , for example, the ECJ seems to acknowledge that the reduction of any phenomena of tax avoidance might justify restrictions to the fundamental freedoms. Nevertheless, the threshold for justification is set remarkably high: the restrictions operated by the UK in that specific case were not, according to the ECJ, sufficiently strict to operate as justifications. Simply defending from a possible revenue erosion of the tax base  cannot be used per se to justify discrimination or restrictions:
«it must be pointed out that diminution of tax revenue occurring in this way is not one of the grounds listed in Article 56 of the Treaty and cannot be regarded as a matter of overriding general interest which may be relied upon in order to justify unequal treatment that is, in principle, incompatible with Article 52 of the Treaty» .
It is apparent that any Member State adopting such measures to prevent tax avoidance or evasion has to prove its case more specifically in order to justify restrictive or discriminatory tax measures .
The ECJ has also upheld the opinion that tax avoidance or abuse must be assessed after considering also the economic reality of a company. In the Cadbury Schweppes case  for example, the fact that the company was established in a Member State for the purpose of benefiting from more favorable legislation was not in itself a sufficient condition for abuse . However, the ECJ had also made it clear that national measures restricting the freedom of establishment could be justified if they are aimed at contrasting
«(w)holly artificial arrangements aimed at circumventing national law» .
These “wholly artificial arrangements” configure the one exclusive circumstance according to which the ECJ discriminates legitimacy of such measures, and it is also a determining factor in assessing any justification for the restriction of the fundamental freedoms if it allows to prevent phenomena of tax avoidance . In the Marks & Spencer case we read that
«Member States are free to adopt or to maintain in force rules having the specific purpose of precluding from a tax benefit wholly artificial arrangements whose purpose is to circumvent or escape national tax law. None the less, the Court must ascertain whether the restrictive measure goes beyond what is necessary to attain the objectives pursued» .
Within certain limits tax planning is acceptable, and EU taxpayers may trust the fundamental freedom of establishment in order to validly circumvent the application of domestic anti‐avoidance provisions , as Member States can only adopt preventive domestic measures that counter artificial arrangements. Furthermore, any restrictive measure adopted by states to curb these phenomena have to be proportionate to the objectives pursued .
In the Cadbury Schweppes case, the Court held that the objective pursued by the fundamental freedom of establishment is achieved if there exists a genuine economic activity . If so, then any intention to achieve a tax advantage becomes irrelevant, or secondary. Thus, canon like the tax residence of a corporation, the application of a more favorable corporation tax rate, as well as the classification of income are not sufficient proof for determining an existing abuse and consequently for applying a discriminatory or restrictive measure .
A genuine establishment can be assessed through the objective examination of all economic factors involved, such as premises, staff, and equipments. A mere letterbox or front subsidiary does not configure then a genuine establishment, with a wholly artificial arrangement factually introducing a substance-over-form evaluation criteria. Application of the relevant tests in the context of the EU Treaty freedoms requires an estimation of their objectives, goals, and aims , on a case-by-case analysis. Justifications based on the generic risk of tax avoidance, or legislative measures not specifically aimed at preventing wholly artificial arrangements, and generally applicable to all situations cannot be considered justifiable :
«(i)t is also important, in that context, to make clear that Member States are free to adopt or to maintain in force rules having the specific purpose of precluding from a tax benefit wholly artificial arrangements whose purpose is to circumvent or escape national tax law» .
Assessing if an activity configures a wholly artificial arrangements also entails an examination of the context of the activity itself: a highly technological service-based economic function has different requirements in terms of equipment and staff than a manufacturing goods .
In this light, it seems difficult to maintain that the Italian provision would have been consistent with a case-by-case examination in order to identify specific pathological situations: the aim of the new regulation was to indiscriminately target all foreign companies operating within the online advertising sector, regardless of whether we were in the presence of a genuine economic activity or of a wholly artificial arrangement, and fundamentally restrictive of the fundamental freedoms,in breach of the principle of non-discrimination, and operating outside of the limits imposed by the principle of proportionality.
This paper has examined the so-called Italian “Google Tax”, a provision that initially introduced a new article in the Italian VAT Act to address the possibility of tax avoidance and tax evasion within Italian territory but addressing EU and international operators in the sector of online advertising.
The provision had a turbulent course and was initially approved, then put on hold, and finally repealed.
The paper examined the provision within the larger framing of EU principles, the primary goal being to understand whether, at least theoretically, national measures may help solve issues of international and European tax evasion and avoidance within the digital economy markets, by their very nature transnational in structure, when no attempt at regulatory, harmonized and coordinated EU actions exists.
Doctrine, literature and case law all support the conclusion that if EU products or services are hindered in their access to the market more than domestic ones, as it is the case here, the free movement provisions have to be used in order to restore balance.
After close scrutiny, the “Google Tax” can be said not to offer a valid solution. The provision does not pass examination from the point of view of respecting the fundamental rights as pushed forth by the EU Charter, it does not comply with EU law in terms of the provisions granting free movements, prohibition of discrimination and restriction. It does not provide a specific enough profile to comply with the proportionality guidelines expressed by the ECJ. Finally, it does collide with the values enshrined in the Italian Constitution. From a legislative point of view, if regulations have such an uneven outcome in terms of consequences on market access, they have to be disapproved .
Domestic tax rules are often based on fiscal policies mostly concerned with the national landscape, and aim at protecting domestic tax revenue. On the other hand, free movement provisions become the source of the legitimation of market integration and non-discriminatory competition, and their transnational nature is directly aimed at containing any undue interference to market activities arising out of national-only concerns .
The Italian “Google Tax” would have been a barrier impeding or hindering market access to non-Italian companies selling online advertising, with no applicable exemption or justification coming from ECJ case law. Such unilateral measures can generate protectionist effects, and this is a major concern : domestic approaches to taxation in the area would increase the fragmentation of the Single European market, and exacerbate the unevenness of the economic playfield . It is safe to conclude that the application of an entirely domestic legislative solution in this specific case would have introduced more issues than it would have solved.
Finally, looking further beyond the text and scope of the disposition itself, such conclusions raise important questions about the role of national lawmakers trying to produce effective tax rules in the context of the so-called e-economy. While doctrine seems sometimes to hint at national solutions, this paper and its examination of the “Google Tax” case offer support for a European-level approach, or at the very least for a EU-aware approach. Specific attention should be paid to coordination and harmonization with EU and international regulations beforehand, something that is not often so necessary for more traditional, and territorially inert, goods and services, but that seems necessary for services which are transparently transnational in nature. The OECD BEPS (Base Erosion and Profit Shifting) action plan experience  and the recent EU appointment of an Expert Group on taxing the digital economy  seem to suggest positive steps in this direction are being taken.
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 Senato della Repubblica, Servizio di Bilancio del Senato, Note di lettura, January 2014, no. 28, p. 1. http://www.senato.it/application/xmanager/projects/leg17/attachments/ dossier/file_internets/000/000/500/NL28.pdf.
 Camera dei Deputati, 28/02/2014, XVII Legislatura, n. 41. http://www.camera.it/
506/newsletter_041.htm. See also art. 2 (1)(a) Law Decree no. 16, March 6 2014.
 Published in the G.U. n. 102, May 5 2014.
 Translation by BALCO-ASSILOV, International Tax News, Italian Google Tax Insight, Nazkhanov and Partners, in Cooperation with Central Asian Tax Research Center, Tax Alert, 2014, p. 10. Original Italian text: «Nel decreto del Presidente della Repubblica 26 ottobre 1972, n. 633, dopo l’articolo 17 è inserito il seguente: Art. 17-bis. (Acquisto di pubblicità on line) 1. I soggetti passivi che intendano acquistare servizi di pubblicità e link sponsorizzati on line, anche attraverso centri media e operatori terzi, sono obbligati ad acquistarli da soggetti titolari di una partita IVA rilasciata dall’amministrazione finanziaria italiana. 2. Gli spazi pubblicitari on line e i link sponsorizzati che appaiono nelle pagine dei risultati dei motori di ricerca (servizi di search advertising), visualizzabili sul territorio italiano durante la visita di un sito internet o la fruizione di un servizio on line attraverso rete fissa o rete e dispositivi mobili, devono essere acquistati esclusivamente attraverso soggetti, quali editori, concessionarie pubblicitarie, motori di ricerca o altro operatore pubblicitario, titolari di partita IVA rilasciata dall’amministrazione finanziaria italiana. La presente disposizione si applica anche nel caso in cui l’operazione di compravendita sia stata effettuata mediante centri media, operatori terzi e soggetti inserzionisti».
 European Parliament, Italian “stability law” and notification procedure, E-014443-13, December 23 2013.
 DE NIGRIS-ROUSSET-ZANOTTI, A Look at Italy’s 2014 Budget Law, Tax Notes International, vol. 73, n. 11, 2014, pp. 1025-1030.
 TOMASSINI-IASELLI, op. cit.
 TFEU, art. 18.
 Case no. COMP/M. 5727-Microsoft/Yahoo! Search Business, Regulation (EC) no 139/2004, Merger procedure, 18/02/2010. Par. 37 states that “A first criterion to categorise online ads is the selection mechanism which is the way the ad is selected to appear on a user’s screen. On this basis, there are two main categories: search ads and non-search ads”.
 QUARANTINO, New Provisions Regarding the Taxation of the Digital Economy, in European Taxation, n. 5, 2014, pp. 211-217.
 Council Directive 2006/112/EC of 28 November 2006 on the common system of Value Added Tax. OJ L 347, 11/12/2006.
 Council Implementing Regulation (EU) no 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax OJ L 77, 23/03/2011, pp. 1-22. Annex I.
 Council Implementing Regulation (EU) n. 1042/2013 of 7 October 2013 amending Implementing Regulation (EU) n. 282/2011 as regards the place of supply of services OJ L 284, 26.10.2013, pp. 1-9.
 Case C-657/11, Belgian Electronic Sorting Technology NV v Bert Peelaers, Visys NV, OJ C 252, 31 August 2013, pp. 12-12.
 Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising. OJ L 376, 27 December 2006, pp. 21-27.
 Directive 2006/114/EC, art. 2 (1) (a). See also Case 657/11 above, para. 4. The Court mentioned also Case C-112/99, Toshiba Europe GmbH v Katun Germany GmbH.,  ECR I-7945. Para. 28, «(i)n view of that especially broad definition, advertising, including comparative advertising, may occur in very different forms».
 HOFER, European Union: The Court of Justice of the European Union. Recent Case-Law Affecting Advertising, Mondaq, 2013. http://www.mondaq.com/.
 Case C-68/92, Commission of the European Communities v French Republic,  ECR I-5881. Para. 14.
 Case C-68/92, Commission of the European Communities v French Republic,  ECR I-5881. Para. 16. See also Case C-73/92, Commission of the European Communities v Kingdom of Spain,  ECR I-5997.
 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce). Official Journal L 178. 17/07/2000.
 Directive 2000/31/EC, Whereas 29th. See also EUROPEAN AUDIOVISUAL OBSERVATORY, Collection, Going Horizontal, IRIS Plus, Legal Observations of the European Audiovisual Observatory, Council of Europe, 2003, p. 28.
 See Legislative Decree April 9 2003, no. 70, Attuazione della Direttiva 2000/31/CE relativa a taluni aspetti giuridici dei servizi della società dell’informazione nel mercato interno, con particolare riferimento al commercio elettronico. For the Advertising Directive, see Legislative Decree August 2 2007, no. 145, Attuazione della Direttiva 2005/29/CE relativa alle pratiche commerciali sleali tra imprese e consumatori nel mercato interno e che modifica le Direttive 84/450/CEE, 97/7/CE, 98/27/CE, 2002/65/CE, e il Reg. (CE) n. 2006/2004.
 Council Implementing Regulation (EU) no. 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax.
 Case 168/84, Gunter Berkholz v Finanzamt Hamburg-Mitte-Altstadt, ECR 2251. Para. 18 «(t)hat services cannot be deemed to be supplied at an establishment other than the place where the supplier has established his business unless that establishment is of a certain minimum size and both the human and technical resources necessary for the provision of the services are permanently present. It does not appear that the installation on board a sea-going ship of gaming machines, which are maintained intermittently, is capable of constituting such an establishment, especially if tax may appropriately be charged at the place where the operator of the machines has his permanent business establishment». See also Case C-190/95, ARO Lease BV v Inspecteur van de Belastingdienst Grote Ondernemingen te Amsterdam,  ECR I-4383.
 Council Implementing Regulation (EU) no 282/2011, Article 11(3).
 TOMASSINI-IASELLI, op. cit.
 TOMASSINI-IASELLI, op. cit.
 Italian VAT Act, no. 633, 1972, art. 7 ter.
 TOMASSINI-IASELLI, op. cit., quoting TROVATO, Destinazione IVAlia, quando la cattiva politica digitale incontra la cattiva politica fiscale, in Focus, no. 226, December 2013.
 COSTANTINI, Limiti all’iniziativa economica privata e tutela del lavoratore subordinato: il ruolo delle c.d. “clausole sociali”, in IANUS, n. 5, 2011, pp. 199-262.
 COSTANTINI, op. cit., pp. 199-262.
 Art. 117: «Legislative powers shall be vested in the State and the Regions in compliance with the Constitution and with the constraints deriving from EU-legislation and international obligations. 2 The State has exclusive legislative powers in the following subject matters: (e) the currency, savings protection and financial markets; competition protection; foreign exchange system; state taxation and accounting systems; equalisation of financial resources».
 Italian Constitutional Court, no. 336, 2005/07/28.
 Italian Constitutional Court, no. 13, 2004/01/13.
 AMERICAN CHAMBER OF COMMERCE IN ITALY, La “Web Tax” è un danno d’immagine per l’Italia, 2013. http://www.amcham.it/?id=418&id_n=4101. Accessed 2014/01/10.
 See for instance the EUROPEAN COMMISSION XV, Report on Competition Policy, 1985, p. 11. «Effective competition (...) preserves the freedom and right of initiative of the individual economic operator and it fosters the spirit of enterprise». See also VAN DEN BERGH-CAMESASCA, European Competition Law and Economics – A Comparative Perspective, Antwerpen, 2001, p. 62.
 HOFER, European Union: The Court of Justice of the European Union: Recent Case-Law Affecting Advertising, Mondaq, 2013. Available at: http://www.mondaq.com/.
 Case 352/85, Bond van Adverteerders and others v The Netherlands State,  ECR 2085. Para. 36.
 Case C-390/99, Canal Satélite Digital SL v Adminstración General del Estado, and Distribuidora de Televisión Digital SA (DTS),  ECR I-607. Para. 33.
 Case C-390/99, Canal Satélite Digital SL v Adminstración General del Estado, and Distribuidora de Televisión Digital SA (DTS),  ECRI-607.
 HELBERGER, Controlling Access To Content: Regulating Conditional Access in Digital Broadcasting, The Hague, 2005, p. 218.
 See for instance TFEU, artt. 119, 120, 127, 173.
 Charter of Fundamental Rights of the European Union, art. 16.
 PETERSMANN, International Trade Law, Human Rights and Theories of Justice, in CHARNOVITZ-STEGER-VAN DEN BOSSCHE (eds.), Law in the Service of Human Dignity – Essays in Honour of Florentino Feliciano, Cambridge, 2005, pp. 44-57.
 Case 240/83, Procureur de la République v Association de défense des brûleurs d’huiles usagées (ADBHU),  ECR 531.
 GORMSEN, A Principled Approach to Abuse of Dominance in European Competition Law, Cambridge, 2010, p. 102.
 Charter of Fundamental Rights of the European Union, art. 6.
 TFEU, artt. 26, 28-30, 45, 56, 49, 63.
 DOUMA, Optimization of Tax Sovereignty and Free Movement - Part III: Optimization by the ECJ in Direct Taxation Cases, in IBFD Dissertation series, 2011.
 TFEU, art. 18.
 VALENTE, La fiscalità diretta secondo la Corte di Giustizia UE, in Affari e Finanza, n. 5, 1998, p.53.
 Case 106/83, Sermide SpA v Cassa Conguaglio Zucchero and others,  ECR 4209. Par. 28.
 Case 152-73, Giovanni Maria Sotgiu v Deutsche Bundespost,  ECR 153. Para.11; Case C-175/88, Klaus Biehl v Administration des contributions du grand-duché de Luxembourg,  ECR I-1779.
 DERLÉN-LINDHOLM, Three Ideas: The Scope of EU Law Protecting Against Discrimination, in DERLÉN-LINDHOLM (eds.), Volume in Honor of Pär Hallström, Uppsala, 2012, pp. 77-100.
 LANDI, National Reporter Italy, in LANG-AIGNER-SCHEUERLE-STEFANER (eds.) CFC Legislation – Tax Treaties and EC Law, The Hague, 2004, p. 369.
 BAMMENS, The Principle of Non-discrimination in International and European Tax Law, in IBFD Doctoral series, 2013, p. 568, quoting VANISTENDAEL (ed.), EU Freedoms and Taxation, EATLP International Tax Series, vol. 2, IBFD, 2006, p. 9.
 BAMMENS, op. cit., p. 568.
 DAHLBERG, Direct Taxation in Relation to the Freedom of Establishment and the Free Movement of Capital, The Hague, 2005, pp. 98-99.
 MELIS, Libertà di circolazione dei lavoratori, libertà di stabilimento e principio di non discriminazione nell’imposizione diretta: note sistematiche sulla giurisprudenza della Corte di Giustizia delle Comunità Europee, in Rass. trib., n. 4, 2000, p. 1151.
 Case 205/84, Commission of the European Communities v Federal Republic of Germany,  ECR 3755. Para. 25.
 ROSSI-MACCANICO, Principi comunitari di fiscalità diretta delle imprese. Il principio di non discriminazione, in Fiscalità Internazionale, n. 3, 2008, p. 226, quoting Case C-446/03, Opinion of Mr Advocate General Poiares, Marks & Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes),  ECR I-10837. Para. 28. See also Case C-190/98, Opinion of Mr Advocate General Fennelly, Volker Graf v Filzmoser Maschinenbau GmbH,  ECR I-493. Para. 21.
 LEHNER, Limitation of the National Power of Taxation by the Fundamental Freedoms and Non-discrimination Clauses of the EC Treaty, in EC Tax Review, Issue 1, 2000, pp. 5-15.
 MELIS, Perdite intracomunitarie, potestà impositiva e principio di territorialità: unicuique suum?, in Rass. trib., n. 5, 2008, p. 1486.
 SNELL, The Notion of Market Access: A Concept or a Slogan?, in Common Market Law Review, no. 47, pp. 437-472.
 DE BOER, Fundamental Rights and the EU Internal Market: Just how Fundamental are the EU Treaty Freedoms? A Normative Enquiry Based on John Rawls’ Political Philosophy Utrecht Law Review, vol. 9, Issue 1, January 2013, pp. 148-168.
 SPAVENTA, From Gebhard to Carpenter: Towards a (non-)economic European Constitution, in Common Market Law Review, vol. 41, no. 3, 2004, pp. 743-773.
 Case C-190/98, Opinion of Mr Advocate General Fennelly, Volker Graf v Filzmoser Maschinenbau GmbH,  ECR I-493. Para. 30. On the distinction between access and exercise of an activity see also DOUMA, op. cit., pp. 207-210.
 TFEU, art. 26 (2): «(t)he internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured».
 ROSSI-MACCANICO, op. cit., p. 226.
 DEL FEDERICO, Tutela del contribuente ed integrazione giuridica europea. Contributo allo studio della prospettiva italiana, Milano, 2010, pp. 18-19.
 Case C-288/89, Stichting Collectieve Antennevoorziening Gouda and others v Commissariaat voor de Media,  ECR I-4007. Paras. 13-14. See also Joined cases 110 and 111/78, Ministère public and “Chambre syndicale des agents artistiques et impresarii de Belgique” ASBL v Willy van Wesemael and others,  ECR 35. Para. 28; Case 62/79, SA Compagnie générale pour la diffusion de la télévision, Coditel, and others v Ciné Vog Films and others,  ECR 881; Joined cases 62 and 63/81, Société anonyme de droit français Seco et Société anonyme de droit français Desquenne & Giral v Etablissement d’assurance contre la vieillesse et l’invalidité,  ECR 223; Case C-113/89, Rush Portuguesa Ldª v Office national d’immigration,  ECR I-1417.
 TFEU, art. 52.
 ROTH, The Rule of Reason Doctrine in European Court of Justice Jurisprudence on Direct Taxation, in Canadian Tax Journal, vol. 56, no. 1, 2008, pp. 67-140.
 Case C-243/01, Tribunale di Ascoli Piceno,  ECR I-13031. See also IZZO, Limiti alla libertà di stabilimento e di prestazioni di servizi nella unione europea, in Impresa Commerciale Industriale, n. 12, 2003, p. 1888.
 Interrogazione e Risposta Parlamentare no. 5-08526, 28 November 2012, risposta del Sottosegretario Vieri Ceriani all’interrogazione presentata dall’onorevole Graziano, Accertamenti tributari nei confronti del gruppo Google. See also Camera dei deputati
– Comm.ne Finanze November 28 2012 – Stefano Graziano (PD) rinuncia ad illustrare la propria interrogazione. Il sottosegretario Vieri Ceriani risponde all’interrogazione, Testo della risposta.
 Case 352/85, Bond van Adverteerders and others v The Netherlands State,  ECR 2085.
 Case C-484/93, Peter Svensson et Lena Gustavsson v Ministre du Logement et de l’Urbanisme,  ECR I-3955. Para. 15.
 Case 270/83, Commission of the European Communities v French Republic,  ECR273.
 Case 270/83, Commission of the European Communities v French Republic,  ECR273. Para. 25.
 ROTH, op. cit., pp. 67-140.
 Case C-264/96, Imperial Chemical Industries plc (ICI) v Kenneth Hall Colmer (Her Majesty’s Inspector of Taxes),  ECRI-4695.
 ROSSI-MACCANICO, op. cit., p. 226.
 See for instance Case C-385/00, F.W.L. de Groot v Staatssecretaris van Financiën,  ECR I-11819. Para. 103: «(i)t is settled case-law that a loss of tax revenue can never be relied upon to justify a restriction on the exercise of a fundamental freedom».
 ROTH, op. cit., pp. 67-140. The author noted as the ECJ used a diverse criterion on VAT Judgement, The court has arguably applied a different, and less restrictive, standard in its VAT decisions. In Halifax for instance (Case C-255/02, Halifax plc, Leeds Permanent Development Services Ltd and County Wide Property Investments Ltd v Commissioners of Customs & Excise,  ECR I-1609), the ECJ defined abuse (Paras. 74-75) as (a)n abusive practice can be found to exist only if, first, the transactions concerned, notwithstanding formal application of the conditions laid down by the relevant provisions of the Sixth Directive and the national legislation transposing it, result in the accrual of a tax. Second, it must also be apparent from a number of objective factors that the essential aim of the transactions concerned is to obtain a tax advantage. As the Advocate General observed in point 89 of his Opinion, the prohibition of abuse is not relevant where the economic activity carried out may have some explanation other than the mere attainment of tax advantages.
 ROTH, op. cit.
 Case C-196/04, Cadbury Schweppes plc and Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue,  ECR I-7995. Para. 37. See also O’SHEA, The UK’s CFC Rules and the Freedom of Establishment: Cadbury Schweppes Plc and its IFSC Subsidiaries – Tax Avoidance of Tax Mitigation?, in EC Tax Review, vol. 16, no. 1, 2007, pp. 13-33.
 Case C-196/04, Cadbury Schweppes plc and Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue,  ECR I-7995. Para. 51. See also O’SHEA, CFC Reforms in the UK-Some EU Law Comments, in EC Tax Journal, 13, 2012, pp. 65-89.
 LAUTIER, Freedom of Establishment: An Unearthed Toy in the Hands of Tax Planners, in EC Tax Students’ Conference, School of Advanced Study, University of London, Institute of Advanced Legal Studies, Working Papers, 2009.
 Case C-446/03, Marks & Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes),  ECR I-10837. Paras. 53 and 57.
 LAUTIER, op. cit.
 MELIS, Perdite intracomunitarie, cit., p. 1486.
 Case C-196/04, Cadbury Schweppes plc and Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue,  ECR I-7995. Para. 75.
 SCHREIBER, International Company Taxation. An Introduction to the Legal and Economic Principles, Springer Texts in Business and Economics, 2013, pp. 111-112.
 COM (2007) 785 final, Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee – The application of anti-abuse measures in the area of direct taxation – within the EU and in relation to third countries. Para. 2, p. 4. See also CLAES, The Taxation of Foreign Passive Income for Groups of Companies, in IFA Cahiers, vol. 98A, 2013, p. 144.
 Case C-264/96, Imperial Chemical Industries plc (ICI) v Kenneth Hall Colmer (Her Majesty’s Inspector of Taxes),  ECRI-4695. Para. 26; see also MURRAY, Tax Avoidance, London, 2012, pp. 23-24.
 Case C-446/03, Marks & Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes),  ECR I-10837. Para. 57. The ECJ quoted also Case C-264/96, Imperial Chemical Industries plc (ICI) v Kenneth Hall Colmer (Her Majesty’s Inspector of Taxes),  ECR I-4695. Para. 26, and Case C-9/02, Hughes de Lasteyrie du Saillant v Ministère de l’Économie, des Finances et de l’Industrie,  ECR I-2409. Para. 50. See also DE BROE, International Tax Planning and Prevention of Abuse. A Study Under Domestic Tax Law, Tax Treaties and EC Law in Relation to Conduit and Base Companies, in IBFD, 2008, p. 818.
 SCHREIBER, op. cit., pp. 111-112.
 SNELL, op. cit., pp. 437-472.
 BIONDI, Free Trade, a Mountain Road and the Right to Protest: European Economic Freedoms and Fundamental Individual Rights, in European Human Rights Law Review, 2004, pp. 51-61.
 DE NIGRIS-ROUSSET-ZANOTTI, A Look at Italy’s 2014 Budget Law, in Tax Notes International, vol. 73, no. 11, 2014, pp. 1025-1030.
 TRENTA, VAT in Peer-to-peer Content Distribution: Towards a Tax Proposal for Decentralized Networks, Doctoral dissertation, Jönköping University, 2013.
 The OECD looks at whether or not the current rules allow for the allocation of taxable profits to locations different from those where the actual business activity takes place, and what could be done to change this if they do. See About BEPS, http://www.oecd.org/tax/ beps-about.htm.
 European Commission, Taxation and Custom Union, Expert Group on Taxation of the Digital Economy. More at: http://ec.europa.eu/taxation_customs/taxation/gen_info/ good_governance_matters/digital_economy/index_en.htm.