Under the proposals, which are being considered by Italy’s senate budget committee, a flat rate tax will apply to sales of digital services such as online advertising. It would come into force from January 2019.

The finance ministry has said it will define exactly which services are taxable by April 2018, with expectations that the likely targets are primarily multinationals such as Google or Amazon, with criteria based on the number of online transactions in a given tax period. Transactions of less than €30 and purchases by individuals would be exempt.

The web tax proposal is contained in an amendment to Italy’s budget law, which the lower house of parliament is expected to vote on by the end of the year.

Massimo Mucchetti, the president of the Senate's industry committee, said: ‘I think it is reasonable to say that this type of activity could generate one billion eventually.’

Earlier this year, Google’s parent company Alphabet agreed to pay Italy €306m in back taxes to settle a long running dispute over its financial arrangements.

The EU is currently debating proposals for changes to the digital taxation regime, but Italy’s suggestion would be the first time a European country has taken direct action. 

In last week’s Budget, Chancellor Philip Hammond said that royalties relating to UK sales from digital businesses that are paid to low tax jurisdictions will be subject to UK income tax from 2019. The Chancellor said the rule change, which is expected to generate £200m a year, would not ‘solve the problem’ of technology companies aggressively minimising their tax bills, but that would it ‘send a signal of our determination’ to clamp down on avoidance.

Report by Pat Sweet