French President Emmanuel Macron has planned to implement an increase in taxes on internet giants such as Google and Facebook.
After failing to convince his European counterparts to introduce it as an EU-wide tax, he decided to implement it in his own country. Many EU officials were against the idea such as Ireland which is well-known for its low-tax jurisdictions.
The matter will be discussed by cabinet ministers and then submitted to Parliament. The proposal put forward regarding the new tax mechanism suggests that lare companies operating within France are subject to a tax of three per cent on their digital sales made within the territory.
This weekend, French Economy Minister Bruno Le Maire told Le Parisien, “The amount obtained from this three per cent tax on digital gross sales in France from January1, 2019 should soon reach 500 million Euros.”
This new tax is called “GAFA tax” which stands for Google, Apple, Facebook and Amazon.
Indeed, the European Commission found that Apple paid just 0.005 per cent of corporate tax on its European profits in 2014 which equates to approximately 50 Euros per million. As a result, in 2016 Apple was ordered by the European Commission to make a payment of 13 billion Euros in taxes to Ireland.
Under EU law, internet giants are expected to report their income which has prompted them to opt for low-tax nations for business such as Ireland, the Netherlands and Luxembourg.
Under the legislation which will be presented by French politician Bruno Le Maire on Wednesday, digital companies with sales of more than 750 million euros per year globally and more than 25 million n France will be taxed.
Le Maire stated, “If these two critera are not met, the taxes will not be imposed.”
He also said that around 30 companies in China, Germany, the US, Spain and the UK will be affected by this tax.
According to Le Maire, taxing such companies “is a question of fiscal justice” because “digital giants pay 14 per cent less tax than small- and medium-sized European companies.”
Ireland, Sweden and Denmark have refused the EU’s efforts to implement a new tax due to fear of decreased investment. Germany had a somewhat neutral stance on the matter as it feared an adverse response from the S against its car industry.
While the prospect of enforcing this tax within Europe has failed, France is hoping for a global agreement by 2020.
France is trying to pursue “common ground” on the issue with members of the Organization for Economic Cooperation and Development (OECD) which is comprised of representatives from the most advanced economies in the world.
Britain, Italy and Spain have also been working on a new digital tax while Singapore, Japan and India are in the process of planning their own schemes.
Recently, aggressive legal action by tax authorities has been taken against these companies.
Just last month, Apple reached an agreement to pay 10 years’ worth of backtracked taxes which amounted to nearly 500 million Euros.
However in 2017, France tax collection drive experienced a setback when their court action against Google resulted in the internet giant not being liable to pay 101 billion Euros in taxes from revenues which were reportedly transferred from France to Ireland.
French tax is “symbolic and does not solve the problem of massive fiscal evastion,” said Raphael Pradeau from the anti-globalisation lobby group Attac. “It’s as if we accept that such firms can practice tax evasion in return for a few crumbs.”