- The European Commission estimates that the proportion of taxes paid by traditional companies is 23 percent on their profits within the union, while Internet companies pay only 8 or 9 percent.
- France says it will cancel the tax if similar international action is taken. Technology giants say they are committed to national and international tax laws.
- President Donald Trump administration condemned the French move, a day before it was ratified.
France’s parliament approved legislation to impose a three-percent tax on Internet and technology companies like Google and Facebook to re-establishing financial justice, says Justice Minister Bruno Le Mayer. The 3% tax will be levied on the sales of multinational companies in France. The French Senate passed a new tax on Thursday, one week after the National Assembly approved it.
This new tax will be imposed on any digital company with revenues exceeding €750 million ($850 million), of which at least €25 million will be generated in France. The tax will be retroactive starting from the beginning of 2019 and is expected to generate revenues of €400 million this year.
The United States has promised to investigate the tax, which it believes unfairly targets US companies, and may lead to punitive charges. But Le Meier said such differences must be resolved through negotiations, not threats.
There is a growing public concern in France about all Internet giants, which are headquartered elsewhere, that avoid paying taxes on their sales in France. The French government has not been able to persuade the European Union to impose similar taxes on a wider scale in the Union as a whole.
These companies can now pay little or no taxes in countries where they do not have a large presence. These companies claim most of their profits only in the countries where they are based. The European Commission estimates that the proportion of taxes paid by traditional companies is 23 percent on their profits within the Union, while Internet companies pay only 8-9%.
France has long argued that taxes should be imposed on digital existence, not just physical existence, and announced its tax on large technology companies last year, after freezing efforts to impose it across the European Union. The imposition of any EU tax requires the approval of all members, and Ireland, the Czech Republic, Sweden, and Finland have objected. The new tax in France will not be limited to corporate profits, but also to revenues generated in the country.
Some 30 companies – most of them US companies- will pay the tax. Other British, Chinese, German and Spanish companies will also be affected. France says it will cancel the tax if similar international action is taken. Technology giants say they are committed to national and international tax laws.
President Donald Trump administration condemned the French move, a day before it was ratified. US Trade Representative Robert Laitheiser said Wednesday that the investigation “will determine whether the tax is racist, unreasonable or if it represents a burden or restriction on US trade.”
The US investigation could pave the way for punitive fees, which Trump has imposed on a number of occasions since he took office. Previous investigations initiated by the administration in Washington included the European Union and China’s trade practices.
The latest inquiry was welcomed by the chairman of the Senate Finance Committee, Chuck Grassley, a Republican senator, and Democratic Senator Ron Wyden, a member of the committee. “Digital service taxes, which France and other EU countries are seeking to impose, are seen as an unfair measure targeting US companies in a way that could affect jobs in the United States and hurt American workers,” they said in a joint statement.