Published: Sun, July 14, 2019

France Flays US Move For Probe Into Tax Regime

France Flays US Move For Probe Into Tax Regime

The new French tax applies only to companies with a global turnover of more than €750 million and a national business in France exceeding €25 million, a bracket which also includes a handful of Chinese, British, German and Spanish retailers.

France's Finance Minister Bruno Le Maire sent a clear message to the US and the rest of the world on Thursday when the country passed a 3% tax on the digital revenues of big tech companies: "France decides its own tax rules".

'I want to tell our American friends that this should be an incentive for them to accelerate even more our work to find an agreement on the worldwide taxation of digital services, ' he said.

Google, Amazon, Facebook and Apple - or GAFA, as the French call the group of American tech giants - are among the companies France will slap with a tax bill.

The tax faced criticism from tech executives, who said it would damage French President Emmanuel Macron's attempt to transform the country into a "start-up nation".

France pushed ahead with the tax after European Union countries failed to agree to a levy valid across the bloc in the face of opposition from Ireland, Denmark, Sweden and Finland.

Yesterday (11 July), the French government approved a 3pc tax on large tech companies' local revenues, which is their total sales in France.

Some experts fear France's unilateral approach with the digital tax will backfire, ultimately harming consumers and smaller businesses it aims to protect.

The US government says it will conduct a so-called Section 301 investigation into the French tax.

They argued that America's argument that the companies, also including Apple, are already being taxed at their headquarters in the USA and should not be subjected to another tax. In October 2018 the United Kingdom government's 2018 Budget included a proposed "Digital Services Tax" which would be 'a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models' - primarily as a means of closing a loophole which has seen companies like Google dodge billions in tax. Estimates suggest it will raise €400m in its first year.

"France is a sovereign state and it alone decides on its taxation mechanisms and it will continue to do so", he said.

Giuseppe de Martino, president of ASIC, said: 'By wanting to overtax unilaterally American companies, Bruno Le Maire has triggered a trade war that penalises the French tech today and will penalise tomorrow many sectors that make the success of the French economy, including wine, cars, and luxury goods'. The Organization for Economic Cooperation and Development (OECD) is now reviewing steps to modernize the tax system for the digital economy but has said it won't reach a conclusion until 2020.

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