There's no doubt that G7 countries and the European Union will be cracking down on corporate taxes. Whether Booking.com or individual properties it works with are responsible for paying the Value Added Tax has been the subject for robust debate for years.
Italy’s tax police believe Booking.com evaded 153 million euros ($186 million) of value added tax (VAT) in connection with holiday rentals booked through its platform, two sources with knowledge of the matter told Reuters on Thursday.
The Genoa police said in a statement they “uncovered a massive tax evasion of more than 150 million euros in unpaid VAT from 2013 to 2019 by a multinational online travel agency based in the Netherlands”, without mentioning the company by name.
The police said their tax audit was conducted as part of a criminal investigation led by prosecutors in the northwestern coastal town.
Booking.com confirmed it has recently received the audit report “which we intend to discuss in full cooperation with the Italian tax authorities.”
The company argues that hotel and bed-and-breakfast owners that use its platform are themselves responsible for collecting and paying the VAT they owe in Italy and other European Union countries.
The Italian move comes days after an agreement by the Group of Seven rich countries’ to create a global minimum corporate tax rate of 15% to squeeze more money out of multinational web companies and reduce their incentive to shift profits to low-tax offshore havens.
Colonel Ivan Bixio, head of the Genoa police group leading the investigation, told Reuters the sort of evasion they had uncovered “generates huge profits to the beneficiaries, harming public budgets and altering the rules of competition.”
The probe concerns VAT on payments between private individuals for rental properties advertised by the online travel agent based in The Netherlands and owned by the U.S. group Booking Holdings inc., based in Delaware.
Booking.com works as an intermediary between property owners and guests. Private accommodation sites which are not professionally run often have no VAT number, and Italian tax authorities believe the online travel agency should then act as withholding agent.
However the Genoa police, having checked 896,500 property owners who worked with the Dutch online giant, concluded it did not pay VAT due to Italy from 2013 to 2019, according to the two sources.
During this period, the commission collected by Booking.com in Italy from this type of private client amounted to 700 million euros, with unpaid VAT of 153 million euros, the sources said.
The Italian probe has attracted the attention of several European tourist destination countries, said one of the sources, with the tax authorities of these nations informally asking investigators for information on the matter.
He did not identify these countries.
As the Genoa prosecutors’ criminal investigation proceeds, Italy’s tax office will launch a separate procedure at the end of which Booking.com will have to decide whether to agree to pay or to contest any allegations of wrongdoing.
(Additional reporting by Toby Sterling in Amsterdam, editing by Gavin Jones and David Evans)
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Photo credit: A property in Tuscany as seen in May 2011. Italian authorities believe Booking.com has evaded lodging tax. Anna & Michal / Flickr.com