March 2018: at France’s request, the European Commission has put forward two proposals for the reform of corporate tax rules and a tax on the big technology players. The aim of this new legislation? To adjust tax laws so that any company with significant digital operations within the EU would have to pay tax there, even the firm had no actual, physical, presence within the bloc. In addition, an interim tax would have been applied to technology giants’ revenues, covering activities from targeted advertising and data exploitation, until the reform was full implemented.
Still, after almost an entire year of discussion, the proposals of last year have yet to move forward in the face of opposition from some EU member states. Now, France and its economy minister, Bruno Le Maire, have decided the country will forge ahead on its own, imposing a tax on digital giants nationally in the absence of regional cooperation.
The French tax is set to be presented to the government this month, before being forwarded to the National Assembly to be adopted as fast as possible. The government is keen to get the show on the road, with the bill to be a retroactive one: tax reform will be made applicable from 1 January 2019. Even so, smaller players need not fret: the levy is set to target companies with revenue exceeding €750 million globally and €25m in France, and will look to extract 5 percent of each firms’ French revenues.
Taxing digital giants was one of Emmanuel Macron’s campaign promises in 2017 in the wake of widespread discontent at the ability of the technology industry to evade traditional obligations. The minister insisted, then, that he was only ready to tolerate “reasonable delays” from the European Union, and he seems to have followed through on his threat.
Even so, unified European legislation requiring every EU member state to back the proposals was never a done deal. Ireland, where several technology giants are headquartered, risk losing a sizeable share of its taxes under the new plans; Sweden, Denmark and Finland also contested the new measures, citing the need to wait until after the implementation of the OECD’s parallel global plan. Even France’s closest ally, Germany, shifted from initial cheerleader to lukewarm bystander.
France is looking to harvest some €500m a year from the new tax. This money, according to Prime Minister Édouard Philippe, could be channeled toward measures proposed by Macron in December in response to the gilets jaunes unrest. Long-accused of sitting comfortably as the “president of the rich,” Macron is undertaking an aggressive new programme of economic and social measures, including a hike in minimum wage, tax-free bonuses, tax-free overtime work, and the removal of still other taxes. His new policy suite is set to add a €10 billion burden on the 2019 budget.
Concern surrounding France’s new proposals centres, predictably, on the potential stifling of the technology industry’s growth. If Big Tech has any hope of curbing the new law, it has a major PR battle to fight.