France Slated to Impose Tax on Digital Companies’ Revenue

The French government introduced a three percent tax on the revenue of technology companies such as Google and Amazon that offer e-commerce or targeted advertising in France. Experts estimate that the tax could reap “billions of dollars” from Silicon Valley companies. The tax is also likely to come up as a topic of conversation in U.S. and European talks, convened by the Organization for Economic Cooperation and Development (OECD), about corporate taxes in the digital age. Europe is pushing to tax Silicon Valley companies on profits made there.

The Wall Street Journal notes that, “the U.S. wants to avoid a patchwork of unilateral taxes and opposes measures that target digital companies in particular.” To that end, it has put forward a compromise that would simply tax overseas marketing spending. The French tax, which will come up for debate in April and is expected to pass, would be retroactive to January 2019.

Applying to “companies with more than €750 million in annual global revenue, including at least €25 million in France,” it will also be “one of the first such taxes to take effect anywhere in the world.” According to French officials, the tax is expected to reap “€400 million ($452 million) in 2019 and rise to €650 million by 2022.”

Facebook, said a spokesperson, “backs the OECD talks and pointed to a change it made in 2017 to book some ad revenue in countries where it operates.” Both Facebook and Google said they “pay all the tax they owe,” although a Google spokesperson also said that it pays the “vast majority of its corporate income tax” in the U.S.

French finance minister Bruno Le Maire, who said that “these giants use your personal data and make significant profit from it, without paying their fair share of tax,” also admitted that the proposed tax is “imperfect” since it taxes revenue rather than profit. Still, he noted, “when France shows its will, that’s when things change,” adding that if and when the OECD reaches an agreement, France will withdraw its tax.

Prior to the unveiling of the new French tax, the French law firm Taj, a Deloitte affiliate, revealed its research showing that “95 percent of the French digital-services tax will be passed along to French companies and consumers in the form of higher prices.” The Computer & Communications Industry Association (CCIA), an international not-for-profit organization, commissioned the study. Spain, the U.K. and Germany have also “floated measures similar to the one France introduced Wednesday in order to wring more tax revenue from Silicon Valley.”