France to impose 'digital tax' in 2020

November 30, 2020 - France

France has decided to impose a new digital tax on big online technology companies this year, apparently violating an agreement with Washington. The companies subject to this tax—in particular Google, Amazon, Facebook and Apple—have been reportedly notified about the decision. The decision is expected to see a round of punitive US tariffs on French goods.

The 3 per cent tax on revenue from digital services in the country was introduced last year. But the French government had last year suspended collections while negotiations on a broader overhaul of the global tax system continued at the Organisation for Economic Cooperation and Development (OECD). Those talks are yet to result in a breakthrough.

In June, US treasury secretary Steven Mnuchin called off the talks, which were being pursued by 137 countries with a target of securing an accord by the end of this year. In October, the OECD acknowledged that no deal was likely before 2021, largely because of US opposition to the proposals.

"We suspended the collection of this tax so that the OECD talks could finish," French finance minister Bruno Le Maire said last month. "These talks have failed, so we will collect taxes from these digital giants in December," he said.

A deposit on the estimated taxes owed will be required in December, with the remainder due next year, a global newswire reported.

US President Donald Trump has termed the tax as being unfairly targeting American technology giants, and last year threatened import duties of 25 per cent on $1.3 billion worth of French products.

France and many other European nations are taking action after public pressure to make US multinationals pay a larger share of their revenues in taxes in the countries where they operate.

Under EU law, companies in the United States can declare profits from across the bloc in a single member state. Most pick low-tax jurisdictions like the Netherlands or Ireland.

In 2019, President Emmanuel Macron's government enacted a three-percent levy on the profits from providing online sales for third-party retailers as well as on digital advertising and the sale of private data.

The taxes brought in around 400 million euros ($475 million) that year. Britain, Spain, Italy and other European countries have also announced digital taxes to give them a bigger share of the profits that tech firms make from their citizens.