Netflix Tax Evasion Probe Launched in Italy

Netflix headquarters
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Netflix headquarters

Netflix does not have a local office in Italy, but prosecutors argue the streaming giant should be treated like a company with a physical presence.

Italian prosecutors have opened a probe into alleged tax evasion by streaming giant Netflix.

Netflix does not have a local office in Italy. Prosecutors in Milan argue though that Netflix should pay taxes in the country like a company with a physical presence there, because it uses the local digital infrastructure to stream content to an estimated 1.4 million users in Italy, Reuters quoted a source as saying. 

Bloomberg News reported that but prosecutors argue Netflix servers and fiber optic cables give it enough of a physical presence to qualify as a local business. Amazon and Alphabet's Google have in recent years settled similar probes with payments worth hundreds of millions of euros, it added.

Netflix, led by CEO Reed Hastings, in a comment on the Italian tax probe said: "Netflix has been working closely with the Italian tax authorities. We pay all the taxes due in Italy and other countries around the world. Netflix invests millions of euros in Italian productions – helping to create jobs and support the local creative community."

Netflix earlier in the week reported financials for 2018 for its Netflix Studios U.K. operation, which is defined as a service unit of its European headquarters where all subscriber revenue and the like from across Europe are compiled. As a result, the financials don't provide a full picture of the company's U.K. business performance. 

Netflix reported a 37 percent profit growth for 2018 in the U.K. to €2.3 million ($2.5 million) as revenue jumped 44 percent to €48 million ($53 million).