France to push ahead with digital tax from January 1

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Europe

Tech giants like Google, Apple, Facebook and Amazon will face new tax laws in France from January 1, with French Finance Minister Bruno Le Maire confirming the country would push ahead with its own regulations as Brussels struggles to come up with an European Union (EU) wide levy.

France has been driving hard for a new so-called "GAFA tax" – named after Google, Apple, Facebook and Amazon – to ensure the global giants pay a fair share of taxes on their massive business operations in Europe.

"The tax will be introduced no matter what on January 1 and it will be for the whole of 2019, for an amount that we estimate at 500 million euros (570 million U.S. dollars)," Le Maire told a press conference in Paris.

In addition to taxing direct sales, France will also require the companies to pay a levy on "advertising revenues, websites and the resale of private data," he said, after a meeting with Russia's economic development minister Maxim Oreshkin.

Under EU law, American technology titans such as Google and Facebook can choose to report their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg.

Facebook's founder Mark Zuckerberg meets with French President Emmanuel Macron at the Elysee Palace in Paris, France, May 23, 2018. /VCG Photo

Such firms, on average, pay a nine-percent levy, compared to 23 percent for other businesses, according to Margrethe Vestager, the EU competition commissioner.

The low tax rates have caused anger among voters in many European countries, but the 28-member bloc is divided on how to tackle the issue.

Ireland, which hosts the European headquarters of several U.S. tech giants, leads a small group of otherwise mostly Nordic countries that argue a new tax could lead to reprisals against European companies and stoke anger in the U.S.

But Paris argues the measure would be a vote-winning accomplishment for mainstream EU politicians before the European Parliament elections next May, in which anti-Brussels populists could do well. Any tax changes must be approved unanimously by member states.

France and Germany had agreed this month to introduce a scaled-back measure that would come into effect in 2021. It would set a three-percent levy on advertising sales only, and would come into effect only if a broader deal is not reached.

The Organization for Economic Cooperation and Development (OECD), which groups open-market democracies, is trying to forge a global solution to ensure Internet groups are taxed in the countries where they do business.

Le Maire said he was still hopeful an EU-wide agreement could be reached by March. It would target companies with worldwide annual turnover above 750 million euros, mainly U.S. giants such as Facebook, Google, Twitter, Airbnb and Uber.

"We are fully determined to win a unanimous European decision," he said, adding that Paris and Berlin would work together to convince those in Europe still opposed to the tax.

Policymakers across the world have struggled over how to tax the U.S.-based giants who dominate their sectors internationally, but who often route their revenues and profits via low-tax jurisdictions to reduce their liabilities.

EU member states such as Britain, Spain and Italy are also working on national versions of a digital tax, while Japan, Singapore and India are planning their own schemes.

Responding to Le Maire's statement, a spokesman for Facebook told AFP: "We continue to respect our fiscal obligations as set out by French and European legislation."

Source(s): AFP