Facebook investigated for tax problems in Italy

Italian police also launched investigation against Google last month

Financial trends and news by Steven Loeb
December 7, 2012
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(Updated to reflect comment from Facebook)

For the second time in a week a major United States Internet company has found itself being investigated by the Italian police for possible issues regarding how much it is paying in taxes.

Italian police have been carrying out checks at the offices of Facebook, located in Milan, in order to determine whether the company had been regularly declaring its income in Italy, Reuters reported Friday.

The police first began their investigation a month ago, but, as of now, there does not seem to be any indication as to just how much the social media giant may potentially owe the Italian government. No further details regarding the Italian investigation are known.

"Facebook pays taxes in Italy as part of our operations there, and we take our obligations under the Italian tax code very seriously. We work closely with tax authorities in every country to ensure we are compliant with the local law. We have been and intend to be fully cooperative with the investigation of the Italian tax authority," a Facebook spokesperson told VatorNews.

The investigation into Facebook’s taxes comes right after Italian police also began investigating Google at the end of November.

In that case, Google is being accused of failing to declare revenue totaling more than €240 million, or over $309 million, resulting in an underpaid tax bill of nearly  €100m, or roughly $129 million, in value added tax.

This is not the first time Google has been accused by the Italian government of underpaying its taxes. A probe was launched in 2007, which found that Google had created a system from 2002 to 2006, where it would transfer the profits it made in Italy to Ireland, so it could pay less in taxes.

A Google spokesperson told The Guardian that it "respects the tax rules of the countries in which it operates" and that "until now, we have not received any request to pay additional taxes in Italy".

The investigations into Google and Facebook are a part of a larger effort on the part of the Italian government in the last few months to collect tax revenue that it is owed.

In addition to these efforts, Italian has also gone after Apple over the past couple of years, regarding a misleading customer protection plan.

In May 2011, the Autorità Garante della Concorrenza e del Mercato (AGCM) began investigating Apple for offering their warranty for one year for free, but encouraging customers to pay for the second year, even though the two-year warranty is already free. Customers are not informed that the second year is already covered.

In December, the antitrust authority fined Apple €900,000, or $1.2 million, “for bad commercial practices that harmed consumers.”

After receiving threats of additional fines, Apple finally stopped selling AppleCare Protection Plan in Italian stores in November.

Google could not be reached for comment.

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