France, Not Waiting for European Union, to Tax U.S. Tech Firms as ’19 Starts

Posted Wednesday, 19 December 2018 ‐ The New York Times

PARIS — With the so-called Yellow Vest movement forcing concessions that have widened the country’s budget shortfall, the French government is accelerating a plan to place hefty taxes on American technology giants that have long maneuvered to keep their bills low while reaping huge sums of money.
France has been working with other countries on a European Union-wide digital tax on companies including Amazon, Apple, Facebook and Google, but some members of the bloc have balked at the proposal.
Bruno Le Maire, the French finance minister, said last week that France would move ahead on its own if the union did not approve such a tax by March.
On Monday, he moved up that date.
“The tax will be introduced no matter what on Jan. 1, and it will be for the whole of 2019,” Mr. Le Maire said. A week ago, he urged the public to “fight with me” on the issue in an interview on French radio, during which he said, “It’s time for these companies to pay the taxes that they owe.”
Mr. Le Maire estimated the total tax bill for the companies affected at around 500 million euros, or $568 million. It will help pay for €10 billion in emergency spending announced last week by President Emmanuel Macron after waves of angry citizens took to the streets of Paris and other cities to protest growing inequality.
The tax, Mr. Le Maire said, would most likely cover not only the companies’ direct sales in France, but also revenue from online marketplaces and the resale of private data. He declined to discuss other details, including the means for introducing the tax or the rate of taxation.
The proposal being considered by the European Commission would tax digital media companies based on where in the 28-member European Union they generate revenue, rather than in the often low-tax countries, like Ireland and Luxembourg, where they have regional headquarters.
The push, which has been led by France and Germany, has been resisted by the low-tax countries and has also raised concerns that it will exacerbate Europe’s simmering trade tensions with the United States.
France’s decision to go its own way for now did not appear to derail the European Commission’s proposal.
A commission spokesman noted in a statement that “about a dozen E.U. countries already have or are considering a form of taxation of digital activities.”
Those countries include Britain, where officials recently unveiled a proposal to impose a 2 percent tax on revenue that social media platforms, search engines and online marketplaces earn there. Spain is introducing its own 3 percent tax on online advertising services, brokering services and the resale of personal data.
But, the commission spokesman noted, “the announcement by France does make it even more urgent for the E.U. to agree on a common digital services tax.”
Mr. Le Maire said he still hoped that a union-wide agreement could be reached by March.
Amazon, Apple and Twitter declined to comment. Facebook and Google did not immediately respond to requests for comment, although the director general of Google France told reporters this month, “Google will pay if a tax on revenue is put in place” in France or in the European Union.
Large technology companies have long avoided paying taxes comparable to other businesses in the European countries where they operate.
Facebook, for instance, paid corporate taxes of €1.9 million in 2017 in France on stated revenue of €55.9 million. The company has more than 34 million users in the country, and much of its revenue was logged in Ireland. Apple paid around €19 million in 2017 taxes in France.
Amazon, too, does business across the union, but has benefited by having its regional headquarters in the low-tax haven of Luxembourg. The European Commission estimates that the online retailer and other companies pay an average effective tax rate of just 9.5 percent, compared with the roughly 23 percent paid by traditional businesses.
The big companies are not alone in opposing the commission’s digital tax proposal. European start-ups have said it would handicap an expanding tech sector in the region that has struggled to match the scale of markets in the United States and China.
France and Germany responded to such concerns by narrowing the proposal to include only larger technology companies, particularly advertising-focused companies like Facebook and Google. Those changes have not mollified everyone.
France’s imposition of a digital tax is one front in a wider campaign in Europe to target American technology companies amid growing concerns about their power and influence in society as well as their business practices.
Germany has enacted a law requiring Facebook and Twitter to remove flagged hate speech within 24 hours or face fines. France has passed rules allowing judges to order the removal of misinformation around elections.
Regulators at the European Commission have also targeted Google, Apple and Amazon for antitrust violations, imposing billions of euros in fines and orders to return unpaid taxes.
The French government sued Google this year for €1.12 billion in taxes it claims the company avoided paying on advertising revenue earned. A Paris court ruled that the government could not collect because Google had declared that the revenue belonged to an Irish subsidiary. The government is appealing.
The European Commission fined Google €2.4 billion last year for abusing its dominant market position, while companies like Apple, Amazon and Qualcomm have also been investigated or penalized.
Amazon reached a settlement in May over a long-running dispute with French tax authorities, who had been seeking nearly €200 million euros in back taxes, interest and penalties for the 2006 to 2010 fiscal years in relation to “the allocation of income between foreign jurisdictions.” The government did not disclose the size of the settlement.
And last year, the European Union’s commissioner for competition, Margrethe Vestager, ordered Luxembourg to collect around 250 million euros in unpaid taxes from Amazon.

Tag: #CorporateTaxes #PoliticsAndGovernment #ComputersAndTheInternet #TaxShelters #OnlineAdvertising #SocialMedia #E-commerce #AdvertisingAndMarketing #AntitrustLawsAndCompetitionIssues #YellowVestsMovement #Amazon.comInc #AppleInc #EuropeanCommission #EuropeanUnion #FacebookInc #GoogleInc #Twitter #Vestager,Margrethe #Europe #France #Ireland #Luxembourg #Spain #GreatBritain

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