News analysis: Italy hits hotel site with past-due tax bill for 350 mln euros

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Italian prosecutors say Dutch online hotel aggregator site skipped out on paying 350 million euros (390 million U.S. dollars) in value-added taxes over a seven-year period.

If the charges made by prosecutors in the northern Italian city of Genoa hold up the case, it will be the biggest tax evasion charges of this kind ever in Italy.

The allegation stated that the Booking Holdings subsidiary did not pay the value-added tax on its Italian businesses. The company is mulling an appeal.

The company becomes the latest of a long line of Internet giants in the spotlight of Italian tax authorities. Previous cases include tax allegations against retailer Amazon, computer and smartphone maker Apple, social media giant Facebook, and search and data company Google, a subsidiary of Alphabet.

But the Booking case is different from most of the others because it alleges that the company did not pay sufficient taxes on business clearly generated in Italy: linking travelers with hotels and other travel-related services based in Italy. The challenge comes from determining whether the part of the service Booking provided was conducted in Italy or elsewhere.

In December, when the charges were first made, Booking denied wrongdoing, saying it should only charge taxes on the commission it collects for booking.

“Italy is attempting to treat Booking the same way it would treat a traditional business down the street,” Francesco Brandi, a former tax authority official working in the school of law at Rome’s La Sapienza University, told Xinhua. “They sold a product, and they should pay the value-added tax on that product. The courts will decide how valid that is.”

In the cases involving Amazon, Apple, Facebook, and Google, tax officials had to determine what part of the value held by a company’s brand or revenue generated from advertising across multiple jurisdictions should be taxed in Italy.

“Italian tax authorities, like their counterparts in many other countries, are always trying to play catch-up,” Francesco Tundo, a tax law professor with the University of Bologna, told Xinhua. “They are trying to apply laws written 40 years ago to companies that are changing the way the world does business.”

Tundo said there was a need for a pan-European tax regime that would allow individual countries to collect taxes based on a uniform set of rules.

“Right now, enforcement is decided on a case-by-case basis,” Tundo said.

Brandi said there was a competition-related aspect to the case, in that if Booking is proved to have underpaid its taxes that would give the company an unfair advantage over its rivals.

If Booking pays the 350 million euros (390 million U.S. dollars) in back taxes, it would be greater than the settlement for 318 million euros (354 million U.S. dollars) paid by Apple and the 306 million euros (340 million U.S. dollars) paid by Google. Facebook paid a tax settlement worth 106 million euros (118 million U.S. dollars), while Amazon’s settlement was for 100 million euros (111 million U.S. dollars).

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