France to Impose Tax on U.S. Technology Companies in 2019

On January 1, 2019, the French government will begin to tax digital companies including Amazon, Apple, Facebook and Google, even as other members of the European Union have balked at imposing an EU-wide tax. French finance minister Bruno Le Maire declared that, as the other EU countries debate, his country will move forward alone, estimating that the total tax bill will come to 500 million Euros ($568 million), which will help defray 10 billion Euros in emergency spending announced by President Emmanuel Macron.

The New York Times reports that Le Maire said the tax “would most likely cover not only the companies’ direct sales in France, but also revenue from online marketplaces and the resale of private data.” He would not comment on “the means for introducing the tax or the rate of taxation.”

The European Commission is considering a proposal that would tax digital companies based on where they generate revenue rather than where they have regional headquarters. Regional headquarters are in low-tax countries like Ireland and Luxembourg, which resist the proposal and have “raised concerns that it will exacerbate Europe’s simmering trade tensions with the United States.”

A Commission spokesperson noted that, “about a dozen EU countries already have or are considering a form of taxation of digital activities,” adding that the French move “does make it even more urgent for the EU to agree on a common digital services tax.” Britain has proposed a 2 percent tax on revenue earned by “social media platforms, search engines and online marketplaces,” and Spain is debuting a 3 percent tax “on online advertising services, brokering services and the resale of personal data.”

The European Commission is addressing the fact that these large tech companies “pay an average effective tax rate of just 9.5 percent, compared with the roughly 23 percent paid by traditional businesses.”

Because European startups have complained that the digital tax proposal would handicap them, France and Germany narrowed “the proposal to include only larger technology companies, particularly advertising-focused companies like Facebook and Google.”

Still, the imposition of a tax only addresses one contentious issue surrounding U.S. tech companies. Both France and Germany have enacted laws related to removing hate speech and misinformation. European Commission regulators have also “targeted Google, Apple and Amazon for antitrust violations, imposing billions of euros in fines and orders to return unpaid taxes.”

France sued Google for €1.12 billion in taxes, and is appealing the ruling of a Paris court that “the government could not collect because Google had declared that the revenue belonged to an Irish subsidiary.”

Amazon settled a dispute (for an undisclosed amount) with French tax authorities seeking “nearly €200 million euros in back taxes, interest and penalties for the fiscal years 2006 to 2010.” The European Commission also “fined Google €2.4 billion last year for abusing its dominant market position,” and the EU’s “commissioner for competition, Margrethe Vestager, ordered Luxembourg to collect around 250 million euros in unpaid taxes from Amazon.”