Azernews.Az

Italy has issued tax demands to Meta and LinkedIn as part of an unprecedented VAT claim against U.S. tech giants, a move that could have far-reaching repercussions across the European Union, according to four sources with direct knowledge of the matter, Azernews reports, citing Brussels Signal.

The action, taken on March 26, follows reports that Meta (the parent company of Facebook and Instagram) and Elon Musk's social media platform X (formerly known as Twitter) were under investigation for alleged tax fraud. However, it had not been disclosed that Microsoft’s LinkedIn was also involved in Italy’s pilot VAT case targeting the tech sector in Europe.

Italy is demanding €887.6 million from Meta, €12.5 million from X, and around €140 million from LinkedIn. These amounts cover the entire period under investigation, spanning from 2015-2016 to 2021-2022, depending on the specific case. The tax assessment notices now served relate only to the years for which the claims are about to expire, namely 2015 and 2016.

While the claims may seem relatively modest compared to the companies' vast revenues, the case is viewed as significant due to its implications for how social media platforms provide access to their services.

Italian tax authorities argue that user registrations on platforms like X, LinkedIn, and Meta should be considered taxable transactions. They contend that providing access to these platforms in exchange for personal data—such as user profiles—constitutes a taxable event, essentially treating the exchange of personal data as a form of payment.

In a statement on March 26, Meta told Reuters it would not comment on the specifics of the case but emphasized that it had “fully cooperated with the authorities on our obligations under EU and local law.” However, the company disagrees with the notion that providing access to its online platforms should be subject to VAT. LinkedIn stated it had "nothing to share at this time," while X did not respond to a request for comment.

This case has the potential to be extended to all 27 European Union member states since VAT is a harmonized EU tax. If the Italian approach is upheld, it could force a significant rethink of the business model used by tech companies, potentially impacting everything from airlines to supermarkets and publishers who offer free services in exchange for user data—often through profiling cookies.

Experts consulted by Reuters suggest that the Italian VAT case could have broad implications, particularly for companies whose business models depend on user data collection and personalized services. A ruling in favor of Italy could set a precedent for tax authorities across Europe, potentially reshaping the way tech companies operate in the EU and how they handle user data.

If this ruling is extended across the EU, tech companies may need to reconsider how they structure their revenue models, particularly those offering free services in exchange for personal data. The ruling could potentially lead to the imposition of VAT on a wide range of digital services, which might affect everything from social media platforms to online shopping services.