France asks tech giants to pay digital tax in a global first

By Rahul Vaimal, Associate Editor
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France is going forward with its plan to tax big tech companies.

The country’s finance ministry has recently sent out notices to big tech companies liable for its digital service tax to pay it as planned in December.

Earlier this year, when talks were underway at the Organization for Economic Cooperation and Development (OECD) on a revision of international tax rules, France had suspended the collection of tax that will affect companies such as US-based Facebook and Amazon.

The Ministry of Finance has long said that if the talks proved to be fruitless by then it would collect the tax in December as scheduled, which is what happened when the nearly 140 countries involved in OECD decided last month to continue negotiating until mid-2021.

“Companies subject to the tax have received their notice to pay the 2020 instalment,” a ministry official said.

Tech tax

Bruno Le Maire, France’s Minister of the Economy, has been pushing hard for tax reform for the past couple of years. Many European economic ministers argue that technology firms are not properly taxed. They generate revenue in one country, but report to tax authorities in another country. They take advantage of countries with low corporate tax to optimize the bottom line.

Hence, the French government agreed not to wait for other European nations and began to work on its own local tax. Two requirements exist:

  • The company generates more than $893 million in revenue worldwide and $29 million in France alone.
  • The company is operating a marketplace (Amazon, Uber, Airbnb etc) or a marketing business (Facebook, Google etc).

Businesses have to pay 3 percent of their French income in taxes if they meet these two requirements.

France-US discussions

Over the last couple of years, France and the US have been discussing on and off about the technology tax. In August 2019, the US President Donald Trump and French President Emmanuel Macron made an agreement by pledging that as soon as the OECD found a way to properly tax technology companies in the countries where they operate, the French government will scrap the French tax.

In January 2020, the two sides agreed to wait a little bit to see if the OECD framework would come through. But since there has been no sign of progress on the matter, France has moved ahead with its decision. Experts predict that there could be a retaliation tariffs on French goods in the US.

Meanwhile, Facebook’s stance “is to ensure compliance with all tax laws in the jurisdictions where we operate”, it said, adding it had received its tax bill from the French authorities. Amazon clarified that it has received a reminder from the authorities to pay the tax and will comply.

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