ROME, Nov 7 (Reuters) - Italy has extended its domestic

tax on digital services to small and medium-sized enterprises

(SMEs) to try to overcome U.S. objections that the levy is

discriminatory, Economy Minister Giancarlo Giorgetti said on

Thursday.

Addressing lawmakers on the government's 2025 budget,

Giorgetti said other European Union countries were likely to so

the same to try to avoid retaliation.

Washington has threatened tariffs over unilateral digital

taxes in Europe, as they mainly target U.S. tech companies such

as Meta Platforms ( META ), Google, and Amazon ( AMZN )

.

Italy in 2019 introduced a 3% levy on revenue from internet

transactions for digital companies with annual sales of at least

750 million euros ($809 million) if at least 5.5 million are

made in Italy.

Now, as part of the government's 2025 budget, the Treasury

plans to remove these minimum conditions, aiming to raise 51.6

million euros on top of the current revenue of 400 million.

Confirming an earlier Reuters report, Giorgetti said that

increasing the number of companies forced to pay the tax was

aimed at avoiding clashes with Washington.

"This eliminates the 'discrimination' element underlying the

U.S. complaint", Giorgetti said. "I think others will emulate

us."

Sources told Reuters this week that the United States had

renewed calls for Italy to repeal its web tax.

During Donald Trump's first term as U.S. president,

Washington said it was prepared to counter the Italian levy.

Now that Trump has won a second term, Italy's web tax is

likely to remain a sensitive issue for Prime Minister Giorgia

Meloni, an Italian government official said.

Complicating the matter, several lawmakers in Italy's

governing coalition oppose the Treasury's proposed changes,

arguing the tax should keep focusing on U.S. Big Tech.

They are planning amendments to the budget bill to maintain

revenue floors while hiking the current 3% tax rate.

"Such action could trigger retaliation from the U.S.,"

Giorgetti warned.

Italy's tax was due to be scrapped following approval of the

first pillar of a global minimum tax aimed at reallocating

taxation rights on about $200 billion of corporate profits to

the countries where the companies involved do business.

However, that international legislation has not come into

force, having become bogged down by divisions between the United

States, India and China.

Giorgetti said the stalemate on the first pillar was

unlikely to be overcome by the end of 2024 and called for a

common EU approach over the matter.

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