France Introduces Digital Tax
On March 6, France unveiled a 3 percent digital tax on large technology companies such as Amazon, Facebook and Google. The move comes after finance minister Bruno Le Maire announced plans in December to tax the revenue of internet giants.
The tax will apply to companies that generate at least 750 million euros of revenue globally and more than 25 million euros of revenue in France, affecting about 30 tech corporations.
Although French officials expect the new tax to bring in about 500 million euros of income annually, a UK tech leader warns that this figure may be lower if the tech companies decide to decrease their investment in France.
After an EU-backed plan to implement a 3 percent tax on tech giants failed last year, some governments are currently “grappl[ing] with how to tax global internet giants that can generate huge domestic revenues from limited physical assets.”
Currently, these tech giants can report their EU revenues in any EU country. It is therefore common for them to choose countries with the lowest corporate tax rates, such as Luxembourg and Ireland.
Le Maire argues that "[digital giants] pour their products onto markets without even paying value-added tax, and hardly any other tax at all. It is intolerable. On the same turnover, they should pay the same tax."
The draft bill commences by pointing out that the average tax rate paid by companies in the European Union is 23.2 percent, while for digital companies, that number is slashed down to 9.5 percent.
France aims to tax the revenues these companies generate from running a digital marketplace, conducting targeted advertising, and re-selling personal data for advertisement purposes. The tax would exclude revenue generated by the direct selling of goods, e-mail and payment service providers, non-targeted advertising, and regulated financial service providers.
Christian Borggreen, head of the European branch of the Computer & Communications Industry Association (CCIA), worries that the “French digital tax proposal would end up harming French startups, investments and increase consumers’ prices,” and that “France should lead efforts to achieve international tax reform — rather than taking unilateral actions that risk undermining global efforts.”
Other countries in Europe, such as Austria, the U.K., Spain and Italy, are also seeking to implement a digital tax.