Corporate tax is a highly debated issue, particularly when it comes to large multi-national corporations. France has taken a firm stance when it comes to digital giants, indicating that the country will tax these companies, even if there is not yet an agreement in place across the European Union to do so.
The announcement of the decision to tax the digital giants within France was made in early December by Bruno Le Maire, the country’s Finance Minister. Le Maire indicated that France will proceed with taxes even if the EU as a whole cannot come to an agreement regarding taxes for digital revenues.
The taxes will not come immediately. When speaking to France 2 television, Le Maire indicated that he is willing to work with other members of the EU on the issue until March. If, at that point, there is still no deal regarding a European tax on those digital giants, then France will start taking action. This will be a tax on the financial level and would start from 2019.
Proceeding the Announcement
The French Finance Minister made his announcement just two days after the ministers in the European Union were unable to come to an agreement for taxing digital revenues. This inability to agree came despite the fact that France and Germany worked together to create a plan with a more limited scope, focusing on major companies such as Facebook and Google instead of maintaining a wide scope.
The Proposed Tax
The idea of taxes on digital giants within the European Union has been in the headlines for months. In early November, the severity of the disagreement regarding this issue came to light as Denmark, Sweden, and Ireland all firmly stood behind their decision to oppose the idea.
The question of whether or not to tax these digital giants is a complicated manner since in many cases, the companies in question have a minimal physical presence within a given country, if any. Despite this, they make a profit within the country and then just move their profits around. The Organization for Economic Co-operation and Development (OECD) had been working towards a solution but without results.
As of November, the proposed tax would be a 3 percent levy on firms that had an annual EU revenue of €50 million or more and a global annual turnover of at least €750 million. Those qualifications would include about 200 companies, helping to provide around €5 billion of funding to the European Union.
Those who opposed the tax argued that it risked reducing the competitiveness of the EU and had fundamental flaws. They additionally expressed concern that it would seem to be targeting American firms, which could lead to repercussions that would negatively impact EU member countries. Opponents further pointed out that the proposal placed the taxation at the wrong place in a business’s timeline, at consumption, and would disproportionally benefit countries in the EU with larger populations.
A Blow to France
French President Emmanuel Macron, in particular, viewed this failure to agree on a tax as a huge blow. The French government had already made a significant political capital into the tax. This only made matters in France worse as the country is already facing nationwide protests making international headlines. Those protests are in regard to the economic policies that people feel benefit high-net-worth individuals and large businesses as well as the high cost of living, without benefiting the poor.
It remains to be seen whether the European Union will be able to come to an agreement regarding a corporate tax on these tech giants or if France will move forward alone come March.
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