All the tricks of Google and Facebook to avoid taxes in Italy
How do Google and Facebook pay few taxes in Italy, despite the very high turnover? Fabio Pavesi's article
Turnover that has exploded from one year to the next, but profits that remain strangely very low and thus the taxes paid to the Treasury remain laughable. This is how the relationship with the Italian tax authorities of the giants of the Web works.
That despite the warnings and sanctions imposed in the past by the Revenue Agency and with the eyes of the Milan prosecutor's office continue to circumvent the tax authorities. The trick is trivial.
As long as the budgeted costs run hand in hand with the increase in turnover and voilà, that's it. Profits remain so low that they pay very little taxes relative to the size of the turnover.
It happened to Google Italy for example. The Italian branch of the digital giant paid taxes in Italy for only 8.1 million euros in 2021. And this on a pre-tax net profit of only 28 million euros on a turnover that exploded to 710 million euros.
A real exploit for Google Italy which saw the turnover achieved in our country run from 505 million in 2020 to 710 million in the year just ended. And that in the years between 2018 and 2019 showed revenues in its financial statements of only 106 million and 184 million, respectively.
This sudden change of gear is due to the agreements with the Italian public prosecutor and tax authorities to calculate all the real revenues obtained in our country in the financial statements. This is the only explanation for the violent jump in turnover.
Evidently before 2020 Google did not record all the revenues made in our country in its Italian balance sheet, thus managing to pay the least possible taxes. We have therefore become compliant and this should have entailed not only recording the true Italian revenues but also recording corresponding profits and therefore a much higher taxable income.
This was not the case, thanks to the fact that the revenues were correctly budgeted, but with them also costs so massive as to keep profits as low as possible. Just look at the 2021 accounts.
Faced with revenues that rose by over 205 million in just one year, costs rose by 200 million. Thus keeping profitability more or less at the level of the previous year. In fact, Google Italy made pre-tax profits of 19 million in 2020 out of 505 million of revenues and in 2021 the pre-tax profits were 28 million.
Only 9 million more compared to revenues that have risen by over 200 million. The result is that Google Italy paid taxes in Italy for only 8.1 million last year and for just over 5.7 million in 2020. It will already be said but the costs are a consequence of the increase in revenues. What's wrong? There is that the costs are almost all intra-group.
That is with the Irish subsidiary of Google. Of the 682 million costs of the Italian branch in 2021, 516 million are costs billed to Google Ireland. And so they kill two birds with one stone. Profits in Italy are kept low (thus paying less taxes) and those costs become revenues for Google Ireland, which obviously pays less taxes than Italy.
The same plot followed Facebook Italy. In 2021, revenues increased by over 100 million to 348 million, but costs also exploded, coincidentally, of the same amount. 99 million more. And so Facebook's pre-tax profit in Italy was only 10.2 million in 2021 compared to 6.5 million in 2020. Taxes paid in 2021 by Facebook to the Italian tax authorities for only 2.67 million. Only 1 million more than in 2020.
Also in this case it turns out, reading the financial statements, that the costs for services equal to 338 million last year are intragroup costs for 311 million with the Irish subsidiary. As you can see, the script is the same. The giants of the Web have begun to correctly attribute the revenues made in our country.
They should have seen profits explode in a similar way, paying the right taxes. On the other hand, with the whole family round of costs, the strong increase in revenues has left the profits slightly higher than when real Italian revenues were not calculated. After all, that something is not going back, the profitability figures say.
In Italy, both Google and Facebook have profitability that does not return compared to the usual global trend of their business. Google Italy makes profits for pre-taxes for only 28 million out of 710 million in turnover, only 4% of turnover.
Facebook in Italy produces pre-tax profits of 10 million out of 348 million in turnover, only 3% of revenues become pre-tax profits. A level too low, given that globally Google (today Alphabet) made profits equal to 29% of revenues in 2021 and Facebook (today Meta) produced profits equal to 33% of global revenues.
How do you see an abyss. If this were the case, the managers of Google and Facebook in Italy would be thrown out instantly for poor profitability. Evidently this is not the case. It is more important to save on the Italian tax authorities than to show real profits.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/google-facebook-tasse-italia/ on Sun, 14 Aug 2022 06:43:32 +0000.