Italy Expands Digital Tax to SMEs Amid U.S. Tensions

Italy has broadened its digital service tax to encompass SMEs, seeking to mitigate discrimination claims from the U.S. The move, part of the 2025 budget, aims to raise additional revenue while potentially averting U.S. tariffs. Italy introduced a 3% tax on digital firms with substantial revenue in 2019.

Italy has extended its digital services tax to include small and medium-sized enterprises (SMEs), a step aimed at quelling U.S. accusations of discrimination, according to Economy Minister Giancarlo Giorgetti. Presenting the government’s 2025 budget to lawmakers, Giorgetti highlighted that other European Union nations are expected to follow suit to avoid U.S. retaliation.

Washington has threatened tariffs over Europe's unilateral digital taxes, which primarily target American tech giants like Meta, Google, and Amazon. Introduced in 2019, Italy's 3% levy targets digital companies with global annual sales exceeding 750 million euros and local sales above 5.5 million euros.

As part of the 2025 budget, Italy plans to scrap these minimum conditions, increasing the number of taxed companies and aiming to raise an additional 51.6 million euros beyond the current revenue of 400 million. Giorgetti confirmed earlier reports that this measure seeks to avoid conflict with the U.S., noting that dropping minimum thresholds addresses the discrimination concern cited by the U.S.