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Italy Concludes Probe into Meta Executives for Alleged €887.6 Million VAT Evasion

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Italian prosecutors have concluded their investigation into alleged tax evasion by Meta (META.O), the parent company of Facebook, involving two executives from its Irish subsidiary, Meta Platforms Ireland Ltd. The probe centers on a claimed €887.6 million ($937.93 million) in VAT evasion. This marks a significant step in the process, although no trial requests have been made yet, as the suspects are still allowed to prove their innocence.

Implications for the Industry

The case could have broader consequences for the tech industry, as it involves how Meta provides access to its platforms like Facebook and Instagram. While the €887.6 million might seem modest compared to Meta’s $32 billion in annual revenue, the issue revolves around the way user data is exchanged for free access to these services, which could set a precedent for how other tech companies are taxed.

Tax Dispute with Italy’s Revenue Agency

The core of the investigation is tied to ongoing negotiations between Meta and Italy’s Revenue Agency. Last year, Italian tax authorities argued that Meta’s user registrations should be considered taxable transactions, as they involve the non-monetary exchange of personal data for access to social media services. The authorities claim that between 2015 and 2021, Meta failed to declare nearly €4 billion in taxable income, leading to VAT evasion of more than €887 million.

Next Steps and Meta’s Response

Meta has 60 days to respond to the Revenue Agency’s observations, after which the company can either settle by paying the proposed amount or initiate a legal challenge. Meta disagrees with the tax authority’s stance, arguing that providing users with access to its platforms should not be subject to VAT. In response to the dispute’s complexity, Italy’s Ministry of Finance has sought a technical opinion from the European Commission’s VAT Committee, though no response has been received yet.

EU Probes Secret Google-Meta Ad Deal Targeting Teens

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European regulators have intensified scrutiny of a secret advertising partnership between Google and Meta Platforms, which reportedly bypassed Google’s policies on protecting minors online. According to a Financial Times report, the now-canceled agreement targeted 13- to 17-year-old YouTube users to promote Meta’s Instagram platform.

The collaboration, revealed in August, initially operated within the United States but was poised for global expansion before being scrapped. Despite its termination, the European Commission continues to investigate the deal. Regulators are reviewing gathered evidence to determine whether further action is warranted, the report noted.

In October, the Commission directed Alphabet, Google’s parent company, to compile and analyze data, internal chats, emails, and presentations related to the campaign.

Industry Safeguards and Policy Updates

Google, which prohibits ad personalization for users under 18, defended its policies in response to the allegations. “The safeguards we have to protect teens, like prohibiting ad personalization, are industry-leading and continue to work,” a Google spokesperson stated via email. The company also emphasized its efforts to strengthen internal training for its sales teams to ensure compliance with these safeguards.

Meta, the parent company of Instagram and Facebook, had earlier enhanced privacy settings and introduced parental controls for Instagram accounts of users under 18. This move was part of a broader initiative to address mounting concerns about the mental health impact of social media on young people.

Potential Regulatory Actions

The European Commission has shared its findings with relevant authorities, who are evaluating whether to initiate formal actions against the companies involved. While Google and Meta have yet to comment directly on the partnership’s implications, this development underscores ongoing efforts to ensure compliance with privacy and advertising regulations for minors in the digital space.

Google’s restrictions prohibit ad targeting for minors based on age, gender, or interests, while Meta’s recent privacy upgrades highlight its intent to address criticisms of how its platforms affect teen well-being. However, this controversy has cast a spotlight on corporate practices regarding minors’ online safety and data privacy.

EU Avoids ‘Terrible Prophecies’ but Faces Trade Challenges with China, Says Gentiloni

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The European Union has successfully avoided the dire economic predictions that loomed in recent years but must now navigate challenges such as Russia’s war in Ukraine and a complicated trade relationship with China, said Paolo Gentiloni, the outgoing European Commissioner for Economy, on Saturday.

Gentiloni pointed out that while the EU’s economy has seen slow growth, it has not experienced the deep recessions, blackouts, or divisions that many had feared in the last few years, especially in the face of Russia’s invasion of Ukraine. “The economy is growing, slowly, but growing,” he said during an interview at the Ambrosetti Forum in Cernobbio, Italy. However, he acknowledged that Europe needs to enhance its competitiveness and make significant strides in areas such as defense and the Capital Markets Union if it is to thrive in the changing global landscape.

The European economy, still recovering from the COVID-19 pandemic, has grappled with a cost-of-living crisis and persistent inflation, exacerbated by Russia’s February 2022 invasion of Ukraine. Despite these difficulties, the eurozone economy expanded in the first half of this year, with GDP growing by 0.3% in the second quarter compared to the first.

Looking ahead, Gentiloni highlighted two major issues the EU must tackle: its relationship with China and the ongoing war in Ukraine. The EU’s decision in June to impose higher tariffs on Chinese electric vehicles—due to the bloc’s belief that they benefit from unfair subsidies—has led to heightened tensions with Beijing. He emphasized that while the EU must remain vigilant in trade relations with China, it is crucial not to abandon international trade entirely.

Gentiloni also downplayed concerns about the potential economic impact of Donald Trump’s possible return to the White House in 2024, noting that while such an outcome would not be welcomed in Brussels, it would not drastically alter U.S.-EU economic relations.

As Gentiloni prepares to step down from his role, Europe faces rising political challenges. The European Commission, led by Ursula von der Leyen, is contending with increasing support for far-right factions, especially as politicians like Hungary’s Prime Minister Viktor Orbán question whether the current Commission is equipped to address Europe’s future challenges.