France Places Digital Tax On American Tech Companies
The United States threatens retaliation after France recently approved a digital service tax on American tech giants. Tech firms like Google and Facebook will now be levied a 3% tax on all sales generated in the European country.
The US did not find this move very friendly. They are now ordering an inquiry into it. A retaliatory tariff may also be in order.
The French government approved the tax on Thursday, 12th July 2019. The country’s National Assembly, which passed the bill, directed it at all major digital companies.
Tech giants that make at least €25 million from France out of a total revenue of over €750 million will be liable to this levy. This new levy is also backdated to be made effective from the beginning of this year, 2019.
Most tech giants barely pay any taxes in countries where they do not have physical branches. They mostly declare profits at their headquarter offices and pay taxes there. This means that most of the major American tech companies only pay taxes in America.
Who does it affect?
Most internet-based companies, therefore, pay considerably lower taxes than the average business in European Union states. Following this, France lobbied to place for taxes on not just physically present companies but digital ones too.
France subsequently announced a tax on big technology firm taxes ahead of an EU decision. The country reached the decision late last year in 2018. This came after the EU stalled because of objections from countries like Sweden, Ireland and the Czech Republic.
The new digital service tax by France, however, goes beyond just profit, the tax is expected to be a 3% levy on all sales made in the country.
The new tax law will affect about thirty companies in total. Among them are US tech companies like Apple, Amazon, Microsoft and Google’s parent company, Alphabet. It also affects German, Spanish, Chinese and some British companies.
However, France has agreed to end the tax if the same measure is reached globally. But the big tech companies say they will only comply with international and national tax laws.
The Finance Minister in France, Bruno Le Maire, said they decided their own tax laws. He added that this should be an incentive to their ‘American friends’ to accelerate their work to ‘find an agreement on the international taxation of digital services.’
Meanwhile, America’s Trade Representative Robert Lighthizer, in response, said an investigation would take place. This he said they would do to “determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce”.