France approves new tax on multinational tech giants

France approves new tax on multinational tech giants
Finance

French lawmakers have voted to approve a new tax on digital services, aimed primarily at large international tech giants based in the US, according to BBC News.

A 3 percent tax on sales by large multinational tech companies was passed by the French senate Thursday, after it was approved by the lower house a week earlier. The government has said international firms, such as Amazon, Apple, Facebook and Google, pay minimal taxes on revenue earned in France.

In April, French Finance Minister Bruno Le Maire said that digital multinationals “pay 14 percentage points less tax than European small and medium enterprises.”

The US has already responded to the move with an unfair-trade investigation that could open the door to retaliatory tariffs. 

France has said that they would eliminate the tax if an international agreement was reached in which digital multinationals were required to pay a fair share of taxes to the nations in which their money is earned. 

“I want to tell our American friends that this should be an incentive for them to accelerate even more our work to find an agreement on the international taxation of digital services,” Le Maire said. 

The European Commission estimates that traditional companies pay a tax rate of about 23 percent on profits in the EU, while digital firms generally pay 8 to 9 percent. These companies declare most of their profits where they are based. 

Britain has also published a draft of a similar measure which would impose a 2 percent tax on revenue from social media, search engines, and online marketplaces that serve British users. Other countries are considering similar taxes, though none have yet come close to putting one into effect.

France’s tax will be levied on digital firms with a revenue of over €750 million, with at least €25 earned in France. It will apply retroactively through this year, and is expected to earn about €400m over 2019. The tax will be based on sales rather than on profits after expenses. 

Amazon called the tax “discriminatory,” while Google called for a “comprehensive and multilateral agreement” instead of “discriminatory unilateral taxes.”

The treaties behind the international tax system were created long before the digital era, with companies only accountable for taxes in countries where they have physical, brick-and-mortar facilities. 

Pascal Saint-Amans, the director of the Center for Tax Policy and Administration at the Organization for Economic Cooperation and Development, told the Washington Post:

“Where there is no physical presence there is no right to tax. In this digital era, is this relevant any longer?”

Photo by °Florian [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)]

Leave a Reply

You must be logged in to post a comment.