Tech giants will now pay more tax in France, after the country decided not to wait for the rest of the EU to introduce the measure. The so-called GAFA tax targeting major digital firms comes into force on January 1.
The French government hopes to raise €500 million ($572 million) with levies specifically aimed at multinational tech firms, including Google, Apple, Facebook, and Amazon, Finance Minister Bruno Le Maire said, announcing the move in December. He stressed that “the tax will be introduced whatever happens.”
Paris has been pushing for what it sees as fairer taxation of the big-tech firms in the European Union. Progress on the issue has stalled in Brussels, as the 28-member bloc is divided on imposing the levies on Silicon Valley giants. Any changes must receive unanimous approval by member states.
Critics say that the big-tech firms are making money from European countries’ economies, but use their complex structure to route some of their profits to low-tax member states.
The opposing block is led by Ireland, which has become a sort of Mecca for US tech companies, and hosts many of their headquarters. Estonia and Sweden are also among those who do not favor France’s bid, fearing that the taxes could trigger US retaliation.
The EU has been discussing plans for a three-percent tax on the revenues of large internet companies that make money from user data or digital advertising. However, the last round of talks on the matter in November resulted in no significant progress, apparently pushing France to move forward with it alone.
Separately, France and Germany reached a consensus on a three-percent levy on digital ads after Paris agreed to water down its initial proposals on a broader tax on data. The two EU powerhouses plan to introduce a new joint measure in 2021, unless the Organization for Economic Co-Operation and Development (OECD) members have agreed on a global approach by then.
France might have its own domestic reasons – like the consequences of the massive Yellow Vest protest – to impose the GAFA tax, named after Google, Apple, Facebook, and Amazon. The recent nationwide demonstrations will cost the French economy a hefty sum and have already resulted in lowering the country’s economic growth forecast for 2018 and 2019, while its budget deficit for next year rose to 3.2 percent, breaching EU rules.
At the same time, French President Emmanuel Macron is a known critic of the big techs. In April, he warned that Google and Facebook are becoming too big to be governed. In May, Macron demanded a gathering of global tech bosses to commit to the common good.
“There is no free lunch,” the French president said. “It is not possible just to have free-riding on one side, when you make a good business.”
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