France plans digital tax but EU as a whole is against one

French Finance Minister Bruno Le Maire detailed a tax bill for digital giant companies like Apple, Google, Amazon, and Facebook that he later introduced during the meeting of the Council of Ministers on Wednesday.

PARIS • France was to unveil legislation yesterday to increase taxes on global Internet giants such as Google and Facebook, putting it among a vanguard of countries seeking to force the companies to pay more in the markets where they operate.

European Union finance ministers are, however, set to ditch a plan to introduce an EU-wide digital tax next week. Still, they agree to work on a global reform of the taxation of Internet companies, an EU document shows.

"A number of delegations continue to have fundamental objections," the Romanian presidency of the EU wrote in a document prepared ahead of the bloc's finance ministers meeting next Tuesday.

The meeting had been seen as the last opportunity to reach a deal on the plan.

Global reform of tax rules has been debated for years, but has never been agreed as national interests differ widely.

Under the plan originally rolled out by the EU Commission last year, large companies would have been required to pay a levy on data sales, online marketplaces and targeted advertising.

But several EU states blocked it, fearing a loss of revenues and retaliation from the United States and other countries affected.

Tax reforms on the EU level must be backed by all 28 member states in order to be approved, but Ireland and Scandinavian countries have staunchly opposed the overhaul.

France, Britain, Spain and Italy are working on national versions of a new digital tax.

Under a proposal to be discussed by the French Cabinet, large firms operating in France would face a tax of 3 per cent on their digital sales in the country.

"The amount obtained from this 3 per cent tax on digital gross sales in France from Jan 1, 2019 should soon reach €500 million (S$770 million)," Economy Minister Bruno Le Maire told the French daily Le Parisien at the weekend.

The new levy is known as the "GAFA tax" in France - an acronym for US giants Google, Apple, Facebook and Amazon - which have until now routed their sales in France through subsidiaries in low-tax EU states.

Under the draft legislation set to be presented by Mr Le Maire yesterday, only digital companies with global annual sales of more than €750 million and sales in France of at least €25 million would be taxed.

About 30 companies from the US, China, Germany, Spain and Britain as well as France would be affected, he said.

The tax authorities in Japan, India, Thailand, Vietnam, Indonesia, Malaysia and Singapore are also planning schemes of their own.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 07, 2019, with the headline 'France plans digital tax but EU as a whole is against one'. Print Edition | Subscribe