Paris introduces digital tax: france sovereign

The new tax for digital companies is to apply retroactively from January 1. The cabinet refuses to allow foreign countries to interfere – for good reason.

A la caisse, s’il vous plait: Facebook and its ilk have to pay the tax in France Photo: dpa

France has passed the tax for large digital corporations. On Thursday, the Senate approved it, and the National Assembly gave the green light earlier this month. The tax applies to groups whose digital activities generate annual revenues of 750 million euros worldwide, and more than 25 million euros in France. They now have to pay 3 percent tax on, among other things, advertising revenue generated online.

Because this targets Google, Amazon, Facebook and Apple, the tax is also called "taxe GAFA." According to forecasts, it will affect around 30 companies, including European ones.

U.S. digital companies are criticized because they often pay only low taxes in Europe. This is helped by tax-saving models in which, for example, a European subsidiary transfers money to the parent company in the U.S. for licenses – thus squeezing local profits. Low-tax countries such as Ireland are also attractive as corporate headquarters.

A tax for digital companies was therefore originally intended to be a European project. But within the EU, Germany, among others, put the brakes on – Finance Minister Olaf Scholz (SPD) probably fears for Germany’s export surpluses if the tax system is changed.

Most recently, a compromise proposal failed in March in the European Council – which the German minister was not exactly unhappy about.

Even before it was passed, the French Senate resolution had already drawn the attention of the U.S. government. Its Trade Representative, Robert Lighthizer, said Wednesday that U.S. President Donald Trump had ordered a review of the French tax. "The U.S. is very concerned that the digital tax (…) unfairly targets American corporations," Lighthizer said in the statement.

France’s Economy Minister Bruno Le Maire reacted even before the adoption: "France is a sovereign state that decides independently on its tax rules," the minister said. At the same time, he forbade "threats" of possible trade sanctions from Washington. (with AFP)

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