France to Go it Alone on Applying a New Tax on Tech Giants

By Fayçal Benhassain | December 19, 2018 | 6:19pm EST
Google’s European headquarters in Dublin, Ireland. (Photo by Vincent Isore/IP3/Getty Images)

Paris (CNSNews.com) – With effect from January 1, France will start levying higher taxes on Internet and technology giants that have significant earnings in the country, French Economy Minister Bruno Le Maire announced this week.

Such proposals have drawn mixed reactions in Europe, but Le Maire told a press conference that France would not wait for the European Union to adopt a measure. He expects the move, involving a three percent tax on advertising profits, will raise $570 million in 2019.

He said the revenue raised would help to finance some of the measures announced by President Emmanuel Macron recently to respond to social grievances raised by the so-called “Yellow Vest” protestor movement.

The idea of increasing taxes on tech companies – a group sometimes called GAFA (Google, Apple, Facebook and Amazon), although also including Twitter and others – has long been discussed by E.U. member-states but no decision has yet been agreed upon.

Dan Shefet, a French lawyer specializing in international law, intellectual property, IT and competition laws, said Ireland and the Scandinavian countries have always opposed the move.

Those countries fear U.S. retaliation and damage to their economies if the E.U. enacts such a measure, he said. All 28 member-states would need to support it to pass.

Some GAFA companies have their European headquarters in Ireland for tax purposes, and often open subsidiaries, or even just small offices, in other E.U. countries, where they pay just a small percentage of money made there, Shefet explained.

Google, for instance, operates in France as an advertising and communication agency, shifting most of its profits to Ireland, which has one of the lowest headline tax rates in Europe, he said.

Luxembourg and Malta, which also have more favorable tax policies, are also opposed to the project.

Germany has had mixed reaction to the E.U. proposal, with some politicians and business leaders fearing that the United States would take retaliatory action targeting the German auto industry.

Le Maire said last month he was working with German Finance Minister Olaf Scholz to reach a French-German agreement on a European tax on tech giants.

Scholz then told the newsmagazine Spiegel that Berlin supported the French model and hoped to see an agreement at the E.U. level. No progress has been made since then, however, hence the French decision to go it alone.

Google declined to comment, saying in an email it had no further details on the subject. Other tech companies did not respond to queries.

In France, corporations earning profits of more than $570,000 today pay 33.33 percent in tax.

MRC Store