* Ruling party's bill would hit online multinationals
* Aims to force more business through Italian firms
* Critics say law unworkable, not thought through
By Gavin Jones
ROME, Nov 4 (Reuters) - Italy's largest ruling party has proposed legislation to raise government revenues by making it more expensive for multinational online companies like Google, Amazon and Yahoo to do business there.
A bill tabled by the centre-left Democratic Party (PD) aims to raise at least 1 billion euros through a law, dubbed the "Google Tax", obliging companies that advertise and sell online in Italy to do so only through agencies with a tax presence in the country.
While its proponents see the measure as a popular way to raise revenues on profitable foreign companies, detractors say it is based on wishful thinking rather than a sound knowledge of how Internet commerce and advertising work.
The proposal would not tax the multinationals directly but would force them to use Italian companies to place their advertisements, rather than doing so through third parties based in low-tax countries like Luxembourg, Ireland or outside the European Union.
The state would benefit from tax levied on the extra income of Italian advertising agencies and Internet service providers.
The man who drafted the bill, lower house budget committee Chairman Francesco Boccia, said it was unacceptable that online companies paid taxes abroad on revenue from sales in Italy, taking advantage of lower fiscal levies elsewhere.
"We shouldn't be trying to raise resources by hiking taxes on fuel, cigarettes or small retailers while our online purchases are raising the profits of companies that have no interest in developing our economy," Boccia said on his website.
The Google Tax is the latest of several proposals by Italian politicians targeting online multinationals, including one to force them to pay their taxes in Italy, but none have been translated into law.
Critics say the latest idea has also not been thought through and would be difficult to apply.
"This is just a Freudian expression of a subconscious desire (to tax online multinationals) rather than a real proposal with a solid basis," said Internet expert Giacomo Dotta on Webnews.it, an Italian online magazine.
No comment on the proposal was immediately available from Google Italia, Yahoo Italia or Amazon Italia.
The PD plans to turn the proposal into an amendment to the government's 2014 budget currently before parliament, Boccia said on his website, a move publicly backed on Monday by PD Leader Guglielmo Epifani.
"I am in favour of the so-called Google Tax," Epifani told La Stampa daily, when asked how the PD hoped to fund around 2.5 billion euros it says must be found next year to help pensioners and workers.
The measure will only become law if it also wins the support of Silvio Berlusconi's centre-right People of Freedom party (PDL), the other main party in Prime Minister Enrico Letta's right-left coalition.