France Imposes 3% Digital Tax Temporarily Until EU/OECD Can Agree
Today France imposed a new digital tax law throughout the country a year after the EU wanted to impose one unilaterally but couldn’t agree.
France’s New Digital Tax Law
Today the French government introduced a tax law aimed at large corporations that have revenue above €750 million overall, and French revenue of above €25 million. The tax will be imposed strictly on digital transactions and exempts transactions such as direct sales, payment platforms and financial services. While the concept might be simple, the country did not disclose how they were going to track and record such transactions to impose their 3% tax. The Finance Minister of France Bruno Le Maire has been outspoken about the need for taxes against these larger corporations in the past.
Le Maire also tried to clear up some confusion for companies that offer digital services in addition to their direct sales. Bloomberg reported that: “Amazon Inc., which wouldn’t be taxed on its direct sales but would be taxed for linking outside vendors with clients.” This means that revenue from 3rd party sellers would not be taxed in their entirety, but Amazon would be taxed on the revenue they receive for facilitating the transaction. This bill is an attempt to target advertising, data sales and marketplaces, where companies generate profits by using French user’s data.
Previous Efforts by EU
It is a year to the date that the EU introduced their first effort to try and establish a tax across the region, however with such a large bloc of countries an agreement has not been reached on the best practice to do so yet; with Germany, Ireland, Denmark and Sweden blocking the vote for various reasons. The EU requires all countries to vote on the matter with full agreement, rather than a majority which would have passed as the other 23 countries approved of the measure. The previous shorthand term for the tax was “GAFA”, representing some of the affected targeted companies Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and Apple (NASDAQ:AAPL). The initial reform was to reduce companies from reporting revenue in lower taxed regions such as Ireland, but the best way to do so has not been established. It should also be of note many of the companies affected are located in the United States, with some voting members fearing retaliation from the United States government.
French Tax to Be Temporary
The idea of the tax is to have it implicated where the value of the transaction is taking place; for instance, if an advertisement on Facebook is seen by a French user, then the revenue received from showing the advertisement would be taxed 3% with the tax proceeds going to France. The tax is retroactive to January 1st of 2019 and is estimated to raise roughly €500 per year for the country. Le Maire also noted that France would repeal their law if the EU or OECD impose an international law, the OECD is expected to have their proposal in 2020.