Italy’s Guardia di Finanza fiscal police has opened a tax probe into Elon Musk‘s social network X in a move that could have a broader impact on the ongoing regulatory battle brewing between the European Union and U.S. tech giants including Google, Apple and Meta.
The Italian probe into X, first reported by Reuters, follows a parallel investigation by Italian authorities into Meta. It specifically involves alleged non-payment by X of €12.5 million ($13 million) in VAT tax for the years 2016-2022. Musk completed his takeover of the platform formerly-named Twitter in October 2022.
Though the amount,and the possible related fine, is small for a juggernaut that generated $3.4 billion in revenue in 2023, the Italian probe is considered significant because it could set an important legal precedent within the European Union at a sensitive time.
U.S. President Donald Trump recently threatened to impose tariffs on imports from countries such as Italy that charge digital service taxes on U.S. tech companies.
The Italian investigation into X and Meta basically focuses on the principle being put forth by Italy’s tax authorities that when social networks provide services, customers provide their data, albeit free of charge, to these platforms. The platforms, in turn, must therefore pay VAT because they earn money from this information, Italian tax authorities claim.
Italy’s fiscal police has given X several weeks to respond to their claim. When this time expires X can either pay up, and therefore accept the principle, or dispute the claim in an Italian court.
X did not immediately respond to a request for comment from Variety.
If the legal precedent is set in Italy that a social media company has to pay tax on its customers, even though they are providing a free service, this principle could be extended across the 27-nation European Union which has a unified VAT tax system.
Italian tax authorities are at the forefront of the European Union efforts to pursue Big Tech companies over tax payments. Google last week agreed to pay €326 million ($341 million) in taxes, fines and interest for not paying taxes on income generated in Italy between 2015 and 2019, specifically on revenues generated by selling advertising space.
However the country’s Prime Minister Giorgia Meloni has developed a close rapport with tech titan. The Italian government is reportedly currently considering a five-year €1.5 billion ($1.57 billion) deal with Musk’s Starlink communications, part of Musk’s SpaceX aerospace business, that is being blasted by opposition politicians.
