French national assembly

French lawmakers approve three per cent tax on digital giants

Image credit: Dreamstime

The National Assembly – the lower house of the French Parliament – has approved a pioneering bill which aims to prevent tax dodging by internet giants.

Tech giants such as Apple and Amazon have long been accused of avoiding paying taxes, through methods such as setting up their headquarters in low-tax European countries like Luxembourg and Ireland, while the Tax Justice Group recently accused Google of avoiding paying £1.5bn in corporate tax in the UK last year - enough to pay the salaries of an extra 60,000 NHS nurses. The company paid just £67m in corporation tax in the UK.

In October 2018, the EU Commissioner for Tax announced plans to modernise corporate taxation across the bloc by bringing tax on internet giants closer to the average corporate tax rate of 23 per cent. In April, the EU Commissioner for Competition argued that it would be a “huge problem” if taxes on digital companies were not raised. However, a Europe-wide tax on large digital companies has not yet been introduced.

French lawmakers have now taken the lead by introducing a small tax targeting internet giants which pay virtually no taxation in countries like France, despite healthy sales in these countries. Digital companies with a global revenue of more than €750m (£673m) and French revenue of over €25m (£22m) will be required to pay a three per cent tax. As well as Google, Amazon, Facebook and Apple, other US tech companies expected to be affected include Airbnb and Uber, as well as tech companies based in the EU and in China. The approximately 30 companies affected will mostly be those which use consumer data to sell digital advertising.

The bill will go to the French upper house (the Senate) next week, where it is expected to pass without difficulty. According to the French Finance Ministry, the tax could raise approximately €500m (£450m) in its first year, with rapid increases year-on-year.

The French government hopes that other countries will follow suit and is pushing for an international deal with the other Organisation for Economic Co-operation and Development (OECD) countries.

In response, the tech industry has argued that the tax will punish consumers, as costs will rise.

Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.

Recent articles