Italy demands €1 billion from Google in unpaid taxes

Italian authorities are embroiled in a fresh tax dispute with Google, accusing the tech giant of owing €1 billion ($1.07 billion) in unpaid taxes and penalties. This comes seven years after Google settled a previous landmark tax case with Italian revenue officials.

According to sources with knowledge of the situation, Italy's Revenue Agency launched the investigation in December 2022 and claims Google failed to pay taxes on revenue generated in Italy between 2018 and 2022.

However, the basis for this accusation reportedly differs from the previous case. In 2017, Google paid 306 million euros because it was deemed to have a permanent establishment in Italy on the basis of its personnel operating in the country.

This time, Italy has launched the case on the basis that Google has digital infrastructure in the country which allows it to operate and generate revenue. It’s the same approach that was used in a recent Italian tax settlement with Netflix.

This concept, known as "permanent establishment," is a crucial point in international tax law. Companies are generally obligated to pay taxes in countries where they have a physical presence or conduct substantial business activities.

Google, unsurprisingly, maintains it complies with all tax regulations in Italy, including cooperation with authorities. "We comply with tax regulations in all countries where we operate, including Italy," a Google spokesperson said in a statement. "We cooperate with the authorities."

This case follows a trend of increased scrutiny by European nations towards large tech companies and their tax practices. Countries like France and the UK have also pursued tech giants for alleged unpaid taxes in recent years.

According to the sources, Italy's Revenue Agency has started an adversarial process with Google which may end either with a settlement or with the opening of a judicial litigation. And if a settlement is reached, the sources have revealed that the Milan prosecutors will shift their line of investigation to all the other multinational web companies in the country.