Italy wraps up probe into two Meta execs on alleged $1.25 billion tax evasion by Facebook owner
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Meta has said that it takes its tax obligations seriously and has paid all tax required in the countries where it operates.
PHOTO: EPA-EFE
MILAN – Italian prosecutors have wrapped up a probe into alleged tax evasion of €887.6 million (S$1.25 billion) by Facebook parent company Meta involving two executives of its Irish unit, the Milan prosecutor’s office said on Dec 9.
Closing the investigation is the formal step before prosecutors file any requests for trial, unless the suspects have first proven their innocence.
While it is a modest sum for a company that brought in more than US$32 billion (S$42.9 billion) in revenue in 2023, the case could have much wider ramifications for the industry as it hinges on the way Meta provides access to services such as Facebook and Instagram.
Meta has said that it takes its tax obligations seriously, has paid all tax required in the countries where it operates and would fully cooperate with the Italian authorities.
Ongoing negotiations
The Milan prosecutor’s office had been carrying out a criminal investigation into the two managers of the Irish-registered company Meta Platforms Ireland, a subsidiary of the US group.
But the key issue that could affect the wider industry is being played out between Meta and Italy’s Revenue Agency, and it is still far from over.
In 2023, the Italian tax police claimed that Meta user registrations could be seen as a taxable transaction as they implied the non-monetary exchange of a membership account in return for the user’s personal data.
In mid-November, Italy’s Revenue Agency sent Meta a so-called “deed outline” (or “schema d’atto” in Italian), a list of its own observations, fully endorsing the conclusions of a Guardia di Finanza police investigation, two sources with knowledge of the matter told Reuters on Dec 9.
On this basis, the Milan prosecutors and tax police allege that Meta would have failed to declare a taxable income of almost €4 billion from 2015 to 2021, corresponding to value-added tax (VAT) evasion of more than €887 million.
The sources said Meta has 60 days to respond to the tax authority’s observations, after which it will either accept this approach and pay an agreed amount or initiate a full-fledged judicial tax dispute.
“We strongly disagree with the idea that providing access to online platforms to users should be charged with VAT,” a Meta spokesperson said on Dec 9.
Due to the sensitivity and unprecedented nature of the dispute, Italy’s Revenue Agency, via the country’s Ministry of Finance, sent a request for a technical evaluation to the European Commission’s VAT Committee last December.
The requested opinion concerned the VAT treatment of online services provided by the social network in return for the provision of its users’ personal data.
According to the two sources, the agency has yet to receive a response from the Commission’s committee. REUTERS
