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The end of the “free” Internet? Italy's tax plan shocked US tech groups – does EU-wide data taxation come?

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Published on: July 29, 2025 / update from: July 29, 2025 – Author: Konrad Wolfenstein

The end of the

The end of the “free” Internet? Italy's tax plan shocked US tech groups – does EU-wide data taxation come? – Image: Xpert.digital

Billion-dollar claim: why Italy demands sales tax on data from Meta & Co.

Is the domino effect threatened? Italy's advance could trigger EU-wide data taxation – the legal foundations of Italian advance

What is the core of the new Italian approach to sales taxation of digital services?

The core of the Italian approach is to not qualify the provision of personal data by users on online platforms as a free process, but as a consideration relevant to VAT. The Italian financial authorities argue that users pay for access to apparently free services such as social networks with an economically usable good: their personal data. This data is systematically monetized by the platforms, especially through the sale of targeted advertising.

This reassessment leads to the legal classification of the relationship between the user and the platform as a "exchange -like sales". According to European and national sales tax law, such sales exist if a service is not paid against money, but against another property or service. It is crucial that the consideration does not have to be monetary; It is sufficient that it can be given an economic value. In this construct, the platform provides a service (granting the access and the possibility of use), while the user performs his own performance in return, which is designed as a "tolerated service". The user actively tolerates the collection, processing and commercial exploitation of his data, which is regarded as the necessary consideration for the preservation of the platform services.

This legal reclassification releases the common business model "Data against Service" from the field of non-controllability and transfers to the scope of the general VAT provisions. This makes a process that was previously free of charge, a controllable economic exchange that is subject to regular sales tax.

Which fundamental principles of EU VAT law is based on Italy?

Italian advance is based on fundamental and long -established principles of the common VAT system of the European Union. The central concept is the "performance exchange", which represents the basic requirement for the controllability of sales. A taxable exchange of services exists if a service is performed against consideration (fee) and there is an immediate connection between the two.

A crucial principle on which Italy is based is that the consideration does not necessarily have to insist. A exchange or a exchange -like sales in which a service with another service or a non -cash benefit is remunerated is equivalent to a purchase against money as long as the value of consideration can be expressed in money.

For the assessment of the tax, it is not an objective market value, but the "subjective value" is decisive. This is the value that the service recipient of the consideration received actually and which he would be willing to turn up. In the context of the data exchange, this would be the value that the platform attaches to the data obtained from the users in order to provide its services in return.

Finally, it is irrelevant for the existence of an exchange of services whether there is a balanced value ratio between performance and consideration. Even if the exchanged services are not objectively equivalent, this does not change the existence of controllable sales. These principles form the foundation of the Italian argument, which aims to establish the provision of user data as full, controllable consideration.

Which specific articles of the EU VAT guideline 2006/112/EC are crucial and what do you say?

The Italian argument is based on several core items of the EU VAT Directive 2006/112/EC (MWStSystrl), which forms the foundation of the common European VAT system.

The most important article is Article 73 MWStSystrl. It defines the assessment basis for deliveries and services. Accordingly, the tax assessment basis includes everything that forms the value of the consideration that the provider receives or should receive for these sales from the recipient of the service or a third party. In the case of exchange transactions, in which the consideration does not exist in money, this article implies that the value of the performance obtained serves as a assessment basis for the service provided. Italy's position is that the economic value of the user data represents the assessment basis for the service provided by the platform (access).

Article 72 MWStSystrl is closely linked to the general scope of VAT. He defines who is considered a "taxpayer" and makes it clear that deliveries of objects and services that a taxpayer causes as such "against fee" are subject to the tax. The definition of the term "against fee" is central, and Italy interprets it in such a way that it also includes non-monetary consideration such as the provision of data.

After all, Article 80 MWStSystrl also plays a role, albeit a controversial one. This article gives the Member States the opportunity to intervene in sales between "connected persons" (e.g. within a group) and to use the "normal value" (market value) as a basis for the assessment to prevent tax evasion or avoidance. Although the EU Commission argues in a working paper that the relationship between a platform and its users does not represent such a "special connection", Italy could cite this article as legal protection to ensure that the value of the data is not set arbitrarily too low and a market-close assessment is carried out.

How is the "direct connection" between data preparation and service required for taxation?

The "direct connection" is a central criterion for the presence of a controllable exchange of services. According to the constant case law of the European Court of Justice (ECJ), there must be a legal relationship between the service provider and the service recipient, in which mutual services are exchanged. The remuneration received by the performer must be the actual equivalent for the service provided to the recipient.

Italy argues that this direct connection in the “Data against Service” model is clearly given. The legal relationship is justified by the terms of use (Terms of Service), which each user must agree to when creating an account. Without this consent, no access to the platform is granted.

The mutuality and linking of the services result from the clear conditionality: The platform provides its service (access to the network, use of the functions) only on the condition that the user provides the consideration, namely the provision of his personal data and the consent in their commercial exploitation. It is an inseparable coupling business: no data, no service. According to Italian, this mandatory link establishes the necessary direct connection and makes data provision for causal and direct consideration for platform access.

What role does the case law of the ECJ play, in particular the judgment in the case of Baštová (C-432/15)?

The case law of the ECJ, in particular the judgment in the case of Baštová, plays an ambivalent role and is used as a central argument by both sides of the dispute. In this case, it was about a horse owner who had her horses participate in races without paying a entry fee. However, she was able to win prize money if her horses were successfully placed.

The ECJ decided that mere participation in the race was not a service against a fee, since the preservation of a consideration – the prize money – was uncertain. The court found that the "uncertainty of a payment is suitable for lifting the direct connection between the service provided to the service recipient and the payment received if necessary". This uncertainty prevented the existence of a controllable exchange of services.

This judgment is a delimitation argument for the Italian authorities. You will emphasize that the provision of data by the user – in contrast to winning a prize money – is not an uncertain, but a mandatory prerequisite for the use of the platform. The consideration (data) is certainly provided, not just possibly.

For the technology groups, however, the Baštová judgment is the central counter argument. You will transfer the logic of the ECJ to the value page of the transaction and argue that the economic value of the data provided by a single user is extremely uncertain and variable and therefore cannot form a suitable assessment basis.

What counter arguments are there from a legal point of view, especially with regard to the uncertainty of the consideration?

From a legal point of view, there are several strong counter -arguments that are mainly based on the uncertainty of the consideration and the structure of the exchange.

As mentioned, the main argument is derived from Baštová's ECJ decision. The defendant platforms will argue that even if the provision of data is a condition that is completely uncertain for the platform. An inactive user who only creates one profile, but does not share or interacts any further information, provides data of negligible value. However, a highly active user who discloses his interests, intentions to buy and his social network provides data of considerable value. According to the argument, this extreme heterogeneity and unpredictability of the value of the consideration could break through the direct connection required for taxation as well as the uncertainty of payment in the Baštová case.

Another argument is the lack of specificity of the exchange. In a typical exchange business, a clearly defined performance is exchanged for another clearly defined consideration. In the case of the online platforms, the user provides continuous, indefinite current of data of variable quality and quantity and receives an equally undifferentiated, permanent access. There is no transactional character in which a "unit data" is exchanged for a "unit service". This diffuse structure contradicts the classic idea of an exchange of services.

After all, the question of the user's entrepreneur is highly problematic. In order for a taxable exchange of services between two parties to take place, both must generally act as an entrepreneur within the meaning of sales tax law. Private users who use social media for personal purposes generally do not meet the criteria of a sustainable economic activity to achieve income. The assumption that millions of private individuals would be legally and practically seems to be legally durable by the use of Facebook for sales tax entrepreneurs who provide a service to the platform.

The strategic sophistication of the Italian approach is that the debate is deliberately not to create a new "digital tax", but as a correct application, harmonized EU law. By classifying the transaction as an ordinary "exchange-like sales", the argument shifted to the familiar terrain of the VAT directive and the associated ECJ case law. This serves two goals: First, it gives the argument a solid legal basis within the established EU legal framework. Second, it is said to prevent the United States' accusation that it is a discriminatory, unilateral special tax against American corporations – a accusation that is regularly raised against national digital taxes. The dispute becomes a question of legal interpretation, not the controversial creation of new politics.

The core of the legal conflict will revolve around the interpretation of the "uncertainty" from the Baštová judgment. Italy will insist on the certainty of the action (data provision). The platforms will be placed on the uncertainty of the value of this action. This represents a new legal question. Unlike in the horse race, where the action (participation) was certainly, but the reward was uncertain, both the plot of the user (data provision) and the reward (platform access) are certain. The uncertainty is only in the economic value of user performance. The ECJ will have to decide whether this "uncertainty of the value" is legally equivalent to the "uncertainty of the payment" and thus breaks through the direct connection required for taxation. This is the unresolved legal point of focal point of the entire procedure.

The economic and practical dimension of the data assessment

How does Italy try to specifically determine the value of user data as a assessment basis?

Since there is no open market for personal data with easy -to -determine prices, Italy uses three indirect methods to determine the economic value of the data as a assessment basis for sales tax:

Comparison with subscription models

The most obvious method is the comparison with the prices that require platforms for ad -free alternatives. For example, Meta offers a “Pay-OR-OKAY” model in Europe. This subscription originally cost € 9.99 per month for the web version and € 12.99 for mobile devices. After a price reduction, the costs are € 5.99 or € 7.99. The price for advertising freedom is viewed here as a direct proxy for the value of the data that a user provides in the "free" model.

Average sales per user (arpu)

A second method is based on the key figures shown by the corporations themselves in their annual reports. The average sales per user (ARPU) indicates how much sales a company achieve average per active user in a certain period of time. For Meta, this value in Europe for 2023 was $ 75.57. This key figure links the total turnover directly to the user base and thus offers a company internal evaluation of each user. A gross arpu value can also be derived from the global sales of $ 17.1 billion in 2024 and the number of over one billion of over one billion.

Advertising market prices (CPM)

The third method is based on the prices of the digital advertising market. Advertisers pay a price per thousand impressions for targeted ads to the platforms, the so -called cost per mille (CPM). This price reflects what the market is willing to pay for access to specific user profiles. By analyzing and extrapolating these CPM prices, a value for the underlying data profiles can be derived, which only enables targeted advertising.

Which fundamental problems make an objective and uniform assessment of user data difficult?

The evaluation of user data for tax purposes is subject to considerable practical and conceptual problems, which make an objective and uniform assessment basis difficult.

A central problem is the highly heterogeneous and often poor data quality. The information provided by users is often incomplete, faulty or outdated. There are double data records for the same person, profiles with false information and an unknown number of bot accounts that generate data but do not represent real consumers and therefore have no economic value for advertisers. These quality deficiencies make a flat -rate assessment of all user profiles problematic.

Added to this is the dynamic and subjective value of data. The value of a user profile is not static, but constantly changes depending on the current behavior. A user who, through his search queries and interactions, signals an immediate intention to buy for an expensive product, is temporarily more valuable for an advertiser than a passive or inactive user. There is no standardized rating matrix that could capture these dynamic fluctuations in value.

After all, a transparent market price is missing. Unlike goods or standardized services, there is no established market where individual user data profiles are traded and an objective "market value" could form. All evaluation methods proposed by Italy are therefore only indirect proxies that can only approximately map the true value of the performance exchanged in individual cases.

What are the previous tax claims on large technology groups in Italy?

The previous tax claims for large technology groups in Italy are considerable and amount to over one billion euros. These subsequent claims affect several internationally active platform operators and extend over various taxation periods, whereby older years have been checked due to limitation periods. For example, Meta (Facebook, Instagram, WhatsApp) were imposed on VAT to 887.6 million euros for the period from 2015 to 2021, LinkedIn (Microsoft) for the same period with 140 million euros and X (formerly Twitter) for 2017 to 2021 with 12.5 million euros.

How could such taxation be implemented technically and administratively?

The technical and administrative implementation of such a tax would be complex, but Italy has an advanced digital infrastructure that could serve as the basis.

A central instrument would be the "Sistema di Interscambio" (SDI), Italy's system for electronic invoice exchange. Since 2019, all domestic B2B and B2C invoices in a standardized XML format have had to run in real time via this central platform of the tax authority. This already established and comprehensive system could be expanded to also process the declaration of exchange transactions in which data serves in return. The platforms would have to report the aggregated value of the data "preserved" "preserved" by Italian users periodically (e.g. quarterly) via the SDI and pay the sales tax due on it.

For the recording of cross-border transactions, the EU-wide "central electronic system for payment information" (CESOP) could serve as a conceptual model. Cesop was introduced to record cross-border payments and thus combat VAT fraud in e-commerce. Although it is designed for monetary payments, it shows that the EU is able to create systems for persecution cross -border economic processes. A similar mechanism could be developed to record the value of cross -border data flows and assign them to the respective Member States.

The implementation would be based on a self -assessment principle: the platforms would have to declare the value of the data, which could then be checked and audited by the tax authorities.

The problem of the evaluation methods remains. All approaches proposed by Italy are error -related proxies that do not measure the actual value of specific consideration. The price of a subscription measures the value of an ad -free experience, not the value of the data for advertising. The arpu is an average value that mixes highly and low-threshold valuable users and does not depict the "subjective value" of a single transaction. The CPM is a price for access to a target group, not the purchase price for the underlying data itself. This fundamental discrepancy between what is evaluated (the proxy), and what needs to be assessed (the concrete consideration in the barter), is the weakest point in the economic argument and will be a main job in the legal disputes.

At the same time, the technical feasibility is a double -edged sword. The existence of advanced systems such as SDI significantly strengthens Italy's position. In the past, such a tax might have been dismissed as administrative impracticable. Now Italy can refer to a robust real-time report infrastructure and argue that implementation is a solved problem. This shifts the debate of practical hurdles back to the basic legal principles. However, this technical feasibility also raises considerable data protection concerns because it would imply massive processing of transaction data via data transactions by the state.

 

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How the sales tax changes the business model free online services

Collision with data protection law

To what extent is the tax monetization of data in conflict with the principles of the GDPR?

The tax treatment of personal data as an economic consideration is in a fundamental tension between the core principles of the General Data Protection Regulation (GDPR).

The most obvious conflict consists with the principle of "data minimization" (Article 5 paragraph 1 letter C GDPR). This requires those responsible to limit the collection of personal data to the extent necessary for the processing purpose. A tax system that sees data as a valuable, taxable property creates a systemic incentive that runs counter to this principle. The state's fiscal interest lies in maximizing the declared value of the data, which tends to promote more extensive data collection and utilization. At the same time, it is the task of the data protection authorities to minimize exactly this data collection.

The principle of "purpose binding" is also touched. Data that has been collected for a specific purpose must not be processed easily for other purposes. The taxation of data due to its advertising potential for the advertising industry cemented and legitimizes a processing purpose – the commercial monetization – that is critically seen by data protection against.

At a philosophical level, the approach collides with the European view of data protection as a fundamental right. The European Data Protection Committee (EDPB) has repeatedly emphasized that personal data is not a tradable estate ("Tradeable Commodity"), but the discharge of human dignity and fundamental rights to informational self -determination. Taxing data such as goods or service harbors the risk of legally rewriting them as such, which contradicts the entire protective philosophy of the GDPR.

How do European data protection authorities like the EDPB assess the "Pay-OR-OKAY" model that serves as a reference for data assessment?

The "Pay-OR-OKAY" model, in which users have the choice to pay either with their data (through consent in behavioral advertising) or with money, is assessed extremely critically by European data protection authorities, especially the EDPB, especially if it is used by large online platforms.

In a much -noticed statement, the EDPB made it clear that in most cases such a model cannot bring about legal consent within the meaning of the GDPR. The central problem is the lack of voluntariness in consent. If users are faced with a binary choice – either agree to comprehensive data processing or pay a fee – often cannot be mentioned of real freedom of choice.

This applies particularly to large platforms in which there is a significant power weight between the provider and the user. Users could feel forced to agree to data processing so as not to be excluded from important social or professional networks or to lose access to content and connections. Such a situation is seen as a "disadvantage" (detriment), which excludes free consent.

For this reason, the EDPB demands that large online platforms should offer a third, "equivalent alternative", which is free and does not require behavior-based advertising (e.g. only with context-related advertising). This is the only way to ensure real freedom of choice for users. Personal data, according to the EDPB, must not become a feature for which you have to pay for.

Is the taxation of data a legitimation of a practice that is controversial under data protection law?

Yes, the introduction of sales tax on the exchange of data against services can be understood as state legitimization of a practice highly controversial under data protection law. By integrating this process into its tax system and defines it as a source of public income, it himself becomes a direct benefiter of data moneization.

This creates a potential conflict of interest within the state institutions. On the one hand, the Ministry of Finance (in Italy the Agenzia delle Entrate), whose interest is to maximize the tax revenue. This presupposes that the value of the data is recognized as high and its exchange is recognized as a legitimate economic process. On the other hand, the national data protection authority (the guarantee per La Protezione dei Dati Personali), whose legal mandate is to protect the fundamental rights of citizens, which often requires a restriction of data collection and utilization.

This constellation could weaken the position of data protection regulators. It becomes politically and argumentatively more difficult for them to criticize or prohibit a practice that has become a recognized and budgeted part of state revenue. Taxation gives the “Data against Service Data” model an official economic and fiscal recognition, which in contradiction to the data protection assessment is potentially infringing fundamental rights.

Italy's advance provokes a kind of regulatory internal conflict between tax logic and data protection logic. Based on economic reality, the tax authority acts that data has a value and are traded. The data protection authority acts on the basis of the legal principle that data is a fundamental right to be protected. This domestic contradiction reflects the fundamental, unsolved questions of digital economy.

The critical statement of the EDPB on the "Pay-OR-OKAY" model becomes a legal weapon for the technology groups. If the highest European data protection instance argues that the consent obtained under this model is likely to be invalid and forced, the platforms in the tax procedure can argue that the subscription price derived from it cannot be a legitimate, freely agreed market value. You can represent it as an artificially excessive price, which only serves to urge users for consent. This would attack one of Italy's central evaluation methods directly – not on tax law, but on a data protection basis, which is a powerful, interdisciplinary legal argument.

Effects on economy, markets and companies

What are the direct consequences of the advertising budgets of companies?

The introduction of sales tax to the exchange of data against services would have direct and significant consequences for the advertising budgets of companies that advertise on digital platforms.

The basic mechanics of sales tax as indirect consumption tax suggests that the platforms do not carry the tax burden themselves, but will pass them on to their customers – the advertisers – This process, known as "Tax Pass-Through", will lead to a direct increase in advertising costs.

Specifically, this means an increase in prices for central advertising numbers such as the costs per thousand impressions (CPM), i.e. the price for a thousand advertising impressions, and the costs per click (CPC), the price for a single click on an advertisement. Since these key figures form the basis of most digital advertising campaigns, the circulation of advertising on the affected platforms is immediately more expensive.

This cost increase has far -reaching effects on other important key indicators (KPIS) of marketing. With the same advertising budget, a higher CPC or CPM inevitably leads to a poorer return on advertising expenditure (Roas), since less sales are generated with every euro invested. At the same time, the costs per acquisition (CPA), i.e. the costs for the extraction of a new customer, increase, since more money has to be spent on to achieve the same number of conversions. The efficiency of marketing editions is therefore a direct decrease.

How does this approach forces companies to change their marketing strategies in the direction of the first provider data?

The Italian advance acts as a strong catalyst for strategic change in marketing that is already underway: the departure from the dependence on third -party data to prioritization of first -party data.

Taxation makes the use of data related to large platforms such as META or Google, not only more expensive, but also legally more insecure. This creates a strong economic incentive for companies to reduce their dependence on these external data sources.

Instead, companies are forced to invest more in building their own data strategies. The focus is on first-aid data – i.e. data that a company collects directly from its own customers via its own channels (website, app, CRM system) with their explicit consent. Zero-Party Data also gain in importance in which customers consciously and proactively share information with a company, for example in surveys or when configuring preferences.

The advantages of this strategic realignment are diverse: companies obtain greater data accuracy, retain full control over the use of the data, can create more personalized customer experiences and ensure that data protection regulations such as the GDPR ensure. The tax thus acts as an accelerator for building direct, transparent and trusting customer relationships.

Does this change the business model "free" online services fundamentally?

Yes, a consistent taxation of data exchange would change the business model of the "free" online services fundamentally. The advertising model, which is based on the implicit exchange of data for access, becomes more expensive and legally more complex due to the tax.

The platforms will have a strong incentive to create clearer and explicitly monetized relationships with their users in order to establish a clear assessment basis for the tax and to avoid lengthy legal disputes about the evaluation of data.

This is expected to lead to a greater spread of staggered access models (Tiered models). The classic, advertising-financed model could remain as a base animal, but would be connected to the platforms with higher operating costs (due to the sales tax to be paid). In addition, the payment subscription already introduced by META will establish itself as a premium animal. Other hybrid models that combine different degrees of data release and payment are also conceivable. The age of the supposedly free, non -transparent data use would thus give way to a age of the explicit and pregnant choice.

What reactions are to be expected from the financial markets?

The financial markets react sensitively to regulatory uncertainties, especially if they affect the core business of global technology groups. Italian advance is a classic "regulatory risk" – an industry -specific, unsystematic risk that directly influences the share prices and evaluations of the companies concerned.

Analysts and investors will enforce this uncertainty into their evaluation models, which can lead to increased volatility of the share prices until a final legal clarification has been made. The potential financial effects are significant how different scenarios for the meta share illustrate: For example, a 45 percent probability is expected that Italy can give up, which could lead to a price increase of three percent. A legal dispute without EU-wide consequences is expected with a 30 percent probability and would have a neutral effect on the course. If Italy is winning without the decision to make an effect on the EU, a decline of eight to ten percent is expected. An expansion of sales tax on all of Europe, which is estimated with a probability of ten percent, would result in a price loss of twelve to fifteen percent.

These assessments illustrate the perceived risk for investors and translate a complex legal and political question into clear financial effects. A negative outcome, in particular an EU-wide expansion, would lead to considerable price losses, since the tax burden reduces future income and questions the business models.

The Italian sales tax not only serves as an instrument for revenue decorations, but also acts as an active market -designing force. While the main goal is to generate tax revenue, the tax leads to a significant shift in the digital advertising market by increasing the costs of using third-party platform data. This creates a strong commercial incentive for companies to invest in their own provider data infrastructure. This could unintentionally favor companies with direct customer relationships, such as e-commerce providers or subscription services, while companies that rely on platform advertising are disadvantaged. Thus, the tax acts as a catalyst for a more comprehensive restructuring of the digital economy.

Paradoxically, this regulation could ultimately strengthen the market position of the same companies that are targeting it. While the tax causes costs, large platforms such as Meta and Google have financial and personnel resources to adapt to cope with the legal complexity and build up compliant systems. Smaller competitors or new market participants could perceive compliance costs and legal uncertainty as prohibitive market entry barriers. Since the value of first -party data increases, the huge, proprietary data records of the largest platforms become even more valuable and more difficult to replicate, which could even increase their competitive advantage over time.

 

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Effects of sales tax on free business models on the Internet

The European and international context

Why did the EU VAT commission reject the Italian approach for the time being?

The EU's VAT commission, an advisory body, has taken a preliminary and critical attitude to the Italian approach in a non -binding working paper (Working Paper 1107). The rejection was based on two central concerns.

First, the Commission doubted the possibility of determining the market value of personal data objectively and uniformly. The difficulty of a reliable assessment was regarded as a significant practical obstacle for fair and legally secure taxation.

Second, the Commission questioned the existence of a sufficient direct benefit. She argued that users were not obliged to deliver a consistent amount or quality of data, and in return they did not receive any clearly priced, delimited services. This lack of specificity in the exchange ratio weakens the argument for an immediate connection within the meaning of VAT law.

This attitude reflects the general caution of the EU institutions, which prefer a harmonized solution based on consensus for the taxation of the digital economy instead of supporting unilateral advances of individual Member States.

How does Italy's VAT approach (DST) differ in other EU countries such as France, Austria and Spain?

The Italian approach is fundamentally different from digital taxes (DSts), which have been introduced in countries such as France, Austria and Spain, and this difference is of great strategic importance.

The central difference lies in the type of tax and its legal basis. Digital taxes (DSTS) are usually new, independent taxes that are collected as a direct tax rate on gross sales from certain digital activities (e.g. online advertising, sales of user data). They are special taxes that are outside the harmonized VAT system.

Italy's advance, on the other hand, is not a new tax, but the application of the existing, EU-wide harmonized VAT on a transaction that has not yet been considered controllable. It is an indirect consumption tax that is raised to the value of the consideration in an exchange store.

This different legal classification is crucial. Digital taxes (DSTS) are often criticized internationally as discriminatory measures that targeted large (mostly US) technology groups. Italy's sales tax approach is legally more difficult to attack because it refers to the universal and neutral principles of the common EU VAT system. The dispute is not about the introduction of a special tax, but about the correct interpretation of a law that has existed for decades.

Is there a risk of a domino effect in other EU member states?

Yes, the risk of a domino effect is significant and depends largely on the outcome of the Italian legal dispute. Other Member States are currently observing the procedure closely, but behave waiting. Countries such as France, Spain and Austria have already introduced their own digital taxes, but for now remain with this model.

Germany is particularly reserved due to its strong export dependency and concern about US countermeasures.

However, if Italy is successful before the European Court of Justice (ECJ) and the interpretation of the VAT directive is confirmed, this would create a precedent for the entire EU. Such a legally secured way to tax the digital industry would be extremely attractive for other Member States. It promises significant tax revenue and is politically and legally far less vulnerable than the previous national digital taxes. A positive ECJ judgment would therefore most likely trigger a wave of legal adjustments or new interpretations in other EU countries that take over the Italian model.

What potential would have an EU-wide takeover for the EU budget and the creation of new own funds?

An EU-wide takeover of the Italian model would have an enormous fiscal potential and could change the financing structure of the European Union permanently. Tax experts estimate that at the EU level by such a regulation of annual VAT income of 25 to 35 billion euros could be generated.

Compared to the EU budget 2025, which provides for obligations of 199.4 billion euros, this would make up a share of 12.5 to 17.6 percent at the budget. These income would be so significant that they could make an important contribution to financing the EU budget and could be established as new EU funds. The EU budget is currently mainly financed by contributions from the Member States based on their gross national income and are often controversial politically. A new, real source of own funds from an EU-wide VAT on data transactions could reduce the dependence on the ESD contributions. The previous VAT mechanism accounts for around 12 percent of the EU budget, but is also also a contribution from the Member States. A direct collection of VAT on data transactions could replace or complement this mechanism and thus strengthen the financial autonomy of the EU, a long -term goal of European integration.

How do the United States react to this initiative and which trade conflicts threaten?

The United States react to European attempts to tax the digital economy, traditionally rejected and with the threat of trading policy countermeasures. The US trade officer (USTR) has repeatedly argued that such taxes are discriminatory measures that are disproportionately aimed at successful US technology companies.

On the basis of Section 301 of the US trade law of 1974, the USTR has initiated investigations against national digital taxes and threatened with retaliation tariffs from up to 100% on European export goods such as French wine, cheese or handbags. In the past, these threats have led to the introduction or collection of digital taxes.

Although the Italian VAT approach is deliberately designed in such a way that it is legally less vulnerable than an explicit digital tax, a negative reaction from the USA is likely. Since the affected platforms mainly come from the USA, Washington will check the push. If it turns out that the tax is in fact almost exclusively US companies and that European companies are spared with similar business models, the United States could also consider this as discriminatory and trade policy measures. The avoidance of an open trade conflict depends crucially on whether Italy and potentially the EU can prove that the regulation is used fair, neutral and universally.

The choice of sales tax approach is a calculated geopolitical strategy. The previous digital taxes often failed due to the lack of EU consensus and the effective threat of US calculation tariffs. By anchored its tax in the established EU VAT framework, Italy tries to build a legal fortress. The United States is demanding not to attack an unilateral "Italian digital tax", but the application of the EU's common VAT system. If the case goes before the ECJ and it decides in favor of Italy, an EU-wide legal precedent would be created. This would make it far more difficult for the United States to act against individual countries without giving the appearance of the EU's core law.

If this approach is successful, data sales tax could become an important and politically acceptable path to more fiscal integration in the EU. The EU has long been looking for new own funds to reduce the dependence on direct national contributions that are a constant source of political tensions. The taxation of the cross-border digital economy, in which the added value is diffuse, is considered the ideal candidate for a tax at the EU level. Above all, it would tax non-EU companies and create a significant source of income, which would advance the EU's financial autonomy.

The legal aftermath

With what arguments do the affected corporations like to defend themselves like Meta, LinkedIn and X?

The affected technology groups submitted complaints to the Italian tax courts and rely on their defense on a number of fundamental legal and practical arguments. Your defense strategy aims to shake the cornerstones of the Italian argument:

  • A lack of direct connection: The core argument of the corporations is that the direct connection between performance and consideration required for taxation is missing. They rely on the ECJ case law, in particular the Baštová judgment, and argue that the extreme uncertainty and variability in the value of the data provided by the users breaks through this connection.
  • A lack of objective evaluability: The argument is closely associated with this that the assessment basis cannot be determined with the legal certainty required for taxation. The corporations criticize the evaluation methods proposed by Italy (subscription prices, arpu, CPM) as unsuitable and incorrect proxies that do not reflect the actual subjective value of the consideration provided in individual cases.
  • No contractual exchange of services: The companies deny that the terms of use represent a contract for a exchange -like sales in the sense of sales tax law. They argue that users do not perform entrepreneurial performance, but only use the platforms in a private framework.
  • Conflict with the GDPR: Another strong argument is the contradiction to the General Data Protection Regulation. The corporations will claim that the tax monetization of data contradicts fundamental rights to data protection and the principles of data minimization and purpose binding. You will use the critical attitude of the EDPB to the "Pay-OR-OKAY" model to undermine the legitimacy of the evaluation methods based on it.
  • Wrong place of performance: After all, the companies will argue that sales tax, even if it started, would not be due to Italy. According to EU law, the location of the service is crucial. The corporations will claim that the relevant controllable services, such as the sale of advertising services or central data processing, take place in other EU member states in which their European capital or data centers are located (e.g. Ireland).

How is the expiry of a tax dispute process in Italy and when is a final decision to be expected?

The Italian tax dispute process is multi -stage and can extend over a long period of time. There are basically three instances that have to be passed through before a judgment becomes final.

  • First instance: The procedure begins before the responsible first instance tax court, which was formerly called "Provincial Tax Commission" and is now called "Court for Tax Law First Instance" (Corte di Giustizia Tributaria di Primo Grado).
  • Second instance: Against the judgment of the first instance, appeal can be made to the second instance tax court, the former "regional tax commission" (today Corte di Giustizia Tributaria di Secondo Grado). This court is completely re -enacting the case in both more objective and legal terms.
  • Third instance: The last instance is the Court of Court (Corte di Cassazione) in Rome. This only checks the judgment of the second instance for legal errors, no longer for factual questions.

A special feature of the Italian tax process is the strong emphasis on document evidence, while testimony is usually not permitted.

In view of the complexity of the case, fundamental legal questions and the high level of dispute, it is almost certain that the legal process is fully exploited. In addition, it is very likely that the Italian court or the Court of Court will submit the case to the European Court of Justice (ECJ) for preliminary ruling. The ECJ must then clarify the controversial questions about the interpretation of the VAT directive. This procedure alone can take one to two years. Taking into account all instances and the likelihood of ECJ participation, a final, final decision in this case cannot be expected before 2028.

What are the central teachings for marketers and tax managers today?

Regardless of the final outcome of the procedure, Italian push is already forcing companies to rethink their strategies. For marketing and tax managers, this results in several central teachings:

  • Priority data provider data: The trend away on the dependence on third -party data of large platforms is massively accelerated by such regulatory measures. The investment in your own channels for the collection of initial provider and zero-party data is no longer an option, but a strategic need to reduce costs, minimize legal risks and to build direct, trusting customer relationships.
  • Align budgets for uncertainty: Marketing managers must include the possibility of increasing advertising costs in their budget planning. The prices for digital advertising on large platforms could attract noticeably by passing on tax burdens, which affects the efficiency of campaigns.
  • Understand transparency as a business model: The debate focuses on the value of data. Companies that communicate transparently the value they offer in exchange for data and leave users a real choice will gain the trust of customers in the long term.
  • Diversify channels: A too strong dependence on individual, dominant advertising platforms harbors considerable risks. Marketers should diversify their strategies and check alternative channels such as influencer marketing, content marketing, the establishment of their own communities or the promotion of local social media alternatives.

Is Italy's advance a forward -looking model or a legal risk with an uncertain outcome?

The Italian advance of treating the provision of user data as a return subject to VAT is both: a potentially forward -looking model for the taxation of the digital economy and a legal risk with a highly uncertain outcome.

It is a pioneering attempt to adapt a tax system of the 20th century, which is based on tangible goods and clearly defined services, to the added value logic of the 21st century. The approach is intellectually elegant because it does not invent new special taxes, but tries to integrate the diffuse added value in the data ecosystem into the existing, harmonized legal framework of European VAT. Italy thus addresses one of the most pressing questions of international tax policy.

At the same time, the success of the advance is anything but guaranteed. It depends on a favorable and groundbreaking interpretation of sales tax law by the European Court of Justice. The hurdles are high: the uncertain evaluability of data, the unclear entrepreneurial status of private users and the strong headwind of data protection authorities and the most powerful technology groups in the world.

Regardless of how the courts ultimately decide, Italy has already achieved an important success: it has put a critical debate on the European agenda and questioned the basic assumption of the "free" Internet. Companies, regulatory authorities and the public are now forced to deal with the fundamental question: If data is the new oil, who will collect the tax on it? Italy's answer may be daring, but she broke the silence.

 

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