Abstract
Despite solving many practical tax problems, we can’t neglect the many situations, such as online surfing, chats, online betting, online advertising and so on, that are born from the digital marketplace. This chapter argues that the time has come to reconsider the tax strategy towards Internet-based enterprises and to rethink whether new levies may/should be introduced with a view to catching all new forms of wealth linked to the Internet. After contextualizing the rise of the digital economy and marketplace, the chapter explores such areas as: (1) the recording of Internet domains; (2) the licensing of IP addresses; (3) online advertisements; and (4) Internet accesses (hit tax).
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Notes
- 1.
According to S. Cipollina (I confini giuridici del tempo presente. Il caso del diritto fiscale (Giuffrè, 2003), p. 286), the expression “dematerialized wealth” (ricchezza dematerializzata) has an empirical descriptive nature and may thus not be used for categorization purposes, whereas the more general term “intangibility” (intangibilità) can.
- 2.
J. Rifkin, The Age Of Access: The New Culture of Hypercapitalism, Where All of Life Is a Paid-For Experience (New York: Penguin, 2001). According to the Rifkin, “In the hypercapitalist economy, buying things in markets and owning property become outmoded ideas, while ‘just-in-time’ access to nearly every kind of service, through vast commercial networks operating in cyberspace, becomes the norm. We increasingly pay for the experience of using things—in the form of subscriptions, memberships, leases, and retainers—rather than for the things themselves.”
- 3.
P. Costanzo, Internet (diritto pubblico), in Digesto (disc. pubb.), vol. 1, UTET, 2000, p. 347.
- 4.
N. Irti, see n.9 below, p. 65, suggested that the web is non-space, because it is a non-place, being neither earth, nor sea, nor air. According to P. Cerina (II problema della legge applicabile, in E. Tosi (ed.), I problemi giuridici di Internet. Dall’e-commerce all’e-business (Giuffrè, 2003), p. 739), despite the absence of an effective territorial link, the Web could be deemed as being related to specific places on earth.
- 5.
J.S. Gilmore III, No Internet tax. A proposal submitted to the policies & options Paper of the advisory commission on electronic commerce, in http:// www.ecommercecommission.org.
- 6.
As discussed in Chapter 3, the BEPS Action Plan identifies 15 actions to address BEPS in a comprehensive manner, and sets deadlines to implement those actions: “The spread of the digital economy also poses challenges for international taxation. The digital economy is characterised by an unparalleled reliance on intangible assets, the massive use of data (notably personal data), the widespread adoption of multi-sided business models capturing value from externalities generated by free products, and the difficulty of determining the jurisdiction in which value creation occurs. This raises fundamental questions as to how enterprises in the digital economy add value and make their profits, and how the digital economy relates to the concepts of source and residence or the characterisation of income for tax purposes. At the same time, the fact that new ways of doing business may result in a relocation of core business functions and, consequently, a different distribution of taxing rights which may lead to low taxation is not per se an indicator of defects in the existing system. It is important to examine closely how enterprises of the digital economy add value and make their profits in order to determine whether and to what extent it may be necessary to adapt the current rules in order to take into account the specific features of that industry and to prevent BEPS.”
- 7.
V. Ficari (Regime fiscale delle transazioni telematiche, in Rassegna Tributaria, 2003, p. 870) supports the existing rules, though suggests a shift towards a tax for the new economy.
- 8.
S. Cipollina, see n. 1 above, at p. 287, differentiates between the revolutionary approach and the status quo approacb, whereas the former supports the need for new rules for regulation.
- 9.
B. Inzitari, Contratti su Internet: aspetti della dematerializzazione, R. Rinaldi (ed.), La fiscalità del commercio via Internet: attualità e prospettive (Giappichelli, 2001), p. 128. Against this view N. Irti, Norma e luoghi. Problemi di geo diritto (Cacucci, 2002), p. 66, and V. De Rosa, La formazione di regole giuridiche per il “cyberspazio” in Riv. Inf. e informatica 2003, p. 361.
- 10.
In this sense, P. Adonnino, Il commercio via Internet e la fiscalità: gli aspetti generali delle attività transnazionali e nazionali, in R. Rinaldi (ed.), V. Mastroiacovo, Il controllo, l’accertamento e la riscossione dei crediti tributari derivanti da transazioni telematiche, in Riv.dir.trib. 2004, vol. 1, p. 23.
- 11.
Products sold on the Web can reach a much wider range of potential consumers, thus yielding higher revenues for the economic operator, which also dramatically saves on various costs (including advertising, inventory, staff, agents and so on) and may result in lower prices with respect of sales to consumers.
- 12.
The tax moratorium, introduced in the USA through the Internet Tax Freedom Act moratorium was supported by international organizations (including the European Commission, WTO and the OECD) and various governments in the framework of strategies aimed at not hindering the development of the Web.
- 13.
During the mid-1990s scholars proposed the introduction of a levy on digital transmissions of information, called the bit tax, whose amount should be proportional to the number of bits transmitted and received. Conceived by Arthur Cordell and Thomas Ide towards the end of 1994, the bit tax was the object of analysis by the Commission of Independent Experts appointed by the European Commission for the purpose of drafting the Report Building the European Information Society for Us All. The Chairman of the Commission suggested replacing VAT on services linked to information technologies with a transmission-based tax, that is, a tax levied in proportion to the intensity of the transmission of information or communication. The number of bits or bytes seemed a sufficiently representative unit of the intensity of transmission and could thus be regarded as the (unit to measure the) taxable base.
Liable to such tax would be the person who owns the computer transmitting information on the net, whereas the place of taxable transaction would be that of the residence of the service provider. Consequently, the amount of tax due would be based on the number of bits transmitted, which could be determined through meters that each customer of the net should have installed. By contrast, the amount of bytes downloaded, as well as their private or business nature, would be totally irrelevant for the purpose of the tax.
Despite the important effect of countering information pollution, many have criticized this tax for having too loose a structure, attributing relevance only to the amount of the bits transmitted without taking into account their nature, the (business or private) transmitting taxpayer, or the type of activities carried out through the net. Furthermore, it disregarded the circumstance that a number of factors could affect the number of bits of each digital transmission.
In light of its features, the bit tax does not present a taxable event effectively expressing some form of ability to pay, thus making it inadequate to comply with a number of national constitutions in Europe. Although the inventors of the bit tax have compared it with the highway toll, the transmission of information cannot be directly connected to a public service towards the person obliged to pay it and thus may not be framed as a quasi-permutative levy.
From a different perspective, the bit tax would be unfit to replace VAT, taking into account the respectively different scope, whereas the bit tax would apply also to transmission of bits from persons that are not liable to VAT, thus significantly affecting a specific tax system having its own rational at the EU level.
Further problems would arise at the level of measuring the taxable base (for which a meter would be needed in virtually all computers) and for making tax assessment effective without unreasonable compliance cost or loss of the taxpayer’s anonymity, meaning that the bit tax, as initially proposed, would create more problems than it would solve.
- 14.
Tax literature of various countries distinguishes between various types of taxes, including those remunerating a specific public service and those that do not and are mainly imposed on an expression of ability to pay. Because of its nature (remunerating directly a public service and lacking an expression of ability to pay), it is submitted that the levy on domain recording should belong to the former category of taxes.
- 15.
The fairness of a tax on licences of IP addresses would certainly be greater than one on modems (suggested some years ago by F. Roccatagliata and P. Valente, Bit tax: ultima frontiera nella società dell’informazione? in il fisco 1999, p. 5514).
- 16.
According to the Italian Constitutional Court (Corte Costituzionale, 16 July 1973, no. 131; Corte Costituzionale, 26 July 1979, no. 89), taxes levied on information messages of a mere ideological nature and without any business advertising element infringe on the freedom of thought.
- 17.
At present, Italy levies only local taxes on advertising messages, thus leaving untaxed the largest part of advertising (including that conveyed through broadcasting media). Introducing a general tax on advertising would also make it possible to overcome this negative experience and give the state some substantial source of revenue.
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Uricchio, A. (2016). A Few Ideas for Reforming Internet Taxation. In: Boccia, F., Leonardi, R. (eds) The Challenge of the Digital Economy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-43690-6_6
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