I thought long and hard before publishing this post. In the past few days I have published several tweets, even close together, trying to explain why the so-called "Web Tax", which everyone on the net is discussing, is in my opinion a serious mistake capable of causing more damage than one might think.

Let's go in order: first of all, why am I commenting on a law text, and who am I to do it? If anyone is interested, I have a law degree and have been both a trainee lawyer and a trainee notary. Second: I am a "digital" entrepreneur,  app development, I live off the web and e-commerce and therefore the law in question could have a heavy impact on my profession.

But let's move on to the webtax. Why was it created, and what does it say?

The reason why the web tax was conceived is simple: to recover more money for the state coffers. The Internet has always been a particular sector, where territoriality does not count: the web is fluid, the services are global and sold all over the world without being able to be segmented and regulated according to the "traditional" canons that identify an economic activity with a reference territory. Companies like Google and Facebook have offices all over the world and sell services all over the world, and therefore they can choose where to place their tax headquarters, in order to pay the least taxes possible. It is an understandable choice: who wouldn't do it, if they could?

The problem is relevant, however, because the web giants have a turnover of billions of euros, and generally choose their headquarters very cleverly, which means that they pay very little tax. This is why a web tax was chosen: to try to force the web giants to pay the (high) taxes that exist in our country. Is it right or wrong that multinational companies pay negligible taxes compared to those that ordinary citizens pay? The issue is political, and certainly needs to be addressed, but in our opinion the way it was done is nothing short of grotesque. I'll explain why.

The text of the so-called "webtax" was presented by several parliamentarians in the form of amendments to the stability Law, and subsequently amended. In its initial version, the text provided for three things:

1)  "taxable persons who intend to purchase online services, both as direct and indirect e-commerce, including through media centers and third-party operators, are required to purchase them from persons holding an Italian VAT number"

In simple words, this text means that it is forbidden to Italian companies (not consumers, just companies) to purchase goods or services online from those who do not have a VAT number Italian company.

Examples:

• Buying a good or service on an Italian e-commerce: it can be done.
• Buying a cell phone, perhaps not for sale in Italy, on a foreign e-commerce site: forbidden.
• Purchase a web-based service, even a subscription-based one, such as dropbox or similar: forbidden.
• Buy a Plugin for Photoshop, which is not sold in Italy: forbidden.
• Purchase a service to equip yourself with a network infrastructure that is needed to run an app, such as Parse: forbidden
• Buying a hosting service for your website from a foreign provider, such as hostgator.com: forbidden

The folly of this ban is absolutely obvious to anyone with even the slightest technical knowledge of the internet, of how apps, websites and everything that moves the digital sector. We digital operators and entrepreneurs operate globally and use services and tools sold online by non-Italian companies every day, nor could we do otherwise.

According to the intentions of the legislators, the web tax should have affected only Google, Facebook and Amazon, forcing them to have an Italian VAT number. What has been completely ignored are the other tens of thousands of companies that will never open an Italian VAT number, preferring instead to exclude Italy from their services.

A rule like this is grotesque but above all dangerous, as it was capable of paralyzing thousands of Italian startups, prohibiting the use of some of the most basic services necessary for the functioning of businesses like mine and those of thousands of other guys. With the consequence that we would all have had to go to work atabroad.

Good news: this part of the provision was railing. However, there remains the dismay of how such a provision could have been discussed and approved by the Budget Committee of the Chamber.

But it doesn't end here: the according to the measure is still standing:

2) "taxable persons who intend to purchase advertising services and sponsored links online, even through media centers and third-party operators, are obliged to purchase them from persons holding an Italian VAT number"

but also:

3) “online advertising spaces and sponsored links that appear on search engine results pages (…), viewable on Italian territory during a visit to a site or the use of an online service (…) must be purchased exclusively through entities such as publishers, advertising agencies, search engines or other advertising operators, holders of an Italian VAT number”.

What does it mean? It means that buying dealer or sponsored placements for your company on the internet will be possible, from January 1st, only if the seller has an Italian VAT number.

If things remain as they are today, then it will no longer be possible to purchase sponsored links directly from Google, nor advertise on Facebook.

But not only that: for restaurants and hotels no more advertising on TripAdvisor. No possibility to promote our "Made in Italy" products abroad, while real estate agencies will no longer be able to advertise vacation rental apartments on foreign sites. If I then publish a new app or game, and I want to advertise it to American, Indian or Japanese users, with a leading service like chartboost, I can't do it. With all due respect to my competitiveness.

The solution? Buy the advertising through an Italian intermediary, a publisher or a concessionaire, who will charge for the service, significantly increasing the final price. I smell a lobby.

When Google and Facebook will have an Italian VAT number, they will then have to pay 22% VAT to the tax authorities and their profits will be taxed at 31-32%. If our politicians think that the web giants will accept to reduce their profits to pay taxes in Italy, they will they are wrong in large part: given the dominant position they have on the market, they will be able to afford to increase prices as much as they want, so in essence those who will pay the difference will be the Italian companies, which will undergo price increases notable.

Finally, let's skip over the obligation to pay for online advertising exclusively by bank transfer or mailing. As tragicomic as it may seem, at a time when the world is opening up to virtual currencies such as Bitcoin, Italy is trying to force the purchase of online advertising only through an old and inconvenient tool like bank transfer. Have you ever heard of Paypal? Credit cards? I wonder if these people know that Facebook regulates the allocation of advertising spaces through a complex system of real-time auctions, allowing those who buy advertising to adjust their bid to the cent, adjusting the price of the ad, the targeting, the segmentation and the interests of the recipients, then setting a daily budget and adjusting the payment automatically, once a week. No, to buy advertising you have to go to the post office. Then you wonder if the world (smiles our.

How was the web tax received? Badly. As expected, the law was opposed by the European Commission (the web tax is clearly in violation of EU legislation), as well as some of the most authoritative newspapers in the world.

Two final considerations: since the web is a global, unique, fluid market, Italian companies that operate on the web, such as us app developers, find ourselves in direct competition with foreign companies before other Italian companies. In this sector we already struggle, because the infrastructure and investments are lacking, and taxes are high beyond all limits.

Digital is also one of the few sectors that records annual growth despite the crisis and that brings more revenue and employment to the state coffers. Interventions like this go in the opposite direction to what is hoped for: we need incentives, not blows. We need far-sighted measures, designed to incentivize investments and grow our digital companies, not poorly written laws designed to cut us off from the world. Regulation of the web giants is fine, but don't penalize small businesses.

EDIT (2): The entry into force of the webtax is currently postponed to 1 July 2014. This is already something, then we'll see what happens.