Italy is unquestionably frustrated with digital tax avoidance—and with good reason. But this particular expansion feels less like a principled extension of the underlying policy logic behind VAT and more like an ambitious stretch to find some way to reach big tech’s pockets.

Italy’s Claim

On paper, the theory appears to be relatively straightforward. Under EU VAT law, a taxable transaction requires a supply of goods or services for consideration—when a user creates a social media account, they arguable are entering into exactly that kind of exchange. The user provides their personal data and the platform provides access to the service. No euros are exchanged, but consideration needn’t be monetary.

Social media companies have spent years pitching the value of user data to advertisers and investors. They’ve built empires on the monetization of online user behavior—Italy’s policy begs the question: if it’s valuable enough to sell or have a valuation for investment purposes, why isn’t it taxable?

That is the beginning and end of Italy’s solid policy leg to stand on—from here on out it gets wobbly.

Wobbly Policy Logic

VAT isn’t just a tax on value, it’s a tax on consumption. It is designed to have a broad base, but it is also intended to be keyed to the economy. Turning every exchange of data into a deemed supply of services threatens to untether VAT from that policy logic.

It also raises the question: who is the consumer in this transaction? In a typical VAT system, businesses charge VAT on supplies but can reclaim input VAT on their purchases—hence it is a tax on value added. If Meta “sells” an account to a user in exchange for their personal data, who’s the taxable person and who’s the consumer? Is Meta the supplier and the user the consumer? Then where’s the payment of tax, since individuals can’t deduct input VAT? Is the data itself the “payment?” If so, how is it consumed?

Data isn’t extinguished like electricity or coffee—it is collected, replicated, resold, and algorithmically digested for future use, in perpetuity. If this is a consumption tax, what exactly is being consumed and who is doing the consuming? Italy’s theory opens the door to VAT-ifying intangible and inexhaustible things simply because they generate revenue somewhere down the line.

A crucial aspect in applying VAT to a barter exchange is determining the value of the bartered goods or services—this value is used as the basis for calculating the VAT due. The “open market value” is typically used to establish this value. But what is the open market value of a LinkedIn account?

VAT requires a tax base—some monetary value against which to apply a tax rate. But valuing a user’s personal data at the moment of account creation is impossible. One user’s X account may be worthless, drawing no followers and contributing little to the platform, while another may be an advertising bonanza.

On the other side, how much is personal data worth? Is Meta prepared to assign a different value to an Italian engineer as against a high school student? In the advertising economy, data isn’t bought and sold granularly like a commodity—it is aggregated, profiled, and monetized over time.

Outlook

If this theory sticks, if simply offering access to a service in return for data that may be necessary to even make use of that service, is enough to trigger VAT—then there is no reason to stop at social media.

Airlines that offer free Wi-Fi in exchange for an email address? Sounds like a taxable transaction. Retail loyalty programs that trade purchase history for coupons? VAT-able. What about every shareware piece of software ever launched that offered a free tier in exchange for feedback, data, or brand visibility? Sounds like another bartered exchange.

The logic behind Italy’s apparent claim here doesn’t end with Meta or Microsoft—it touches nearly every business to consumer relationship built on the illusion of “free.” In a world where digital engagement is treated like a currency, Italy’s approach risks turning every moment of online interaction into a taxable event.