France decides to apply a new “digital tax” on online technology giants requiring them to pay 3 per cent on their 2020 earnings, the Finance Ministry said on 25th November, despite Washington warns that it could retaliate with new tariffs on French imports.
“The companies subject to this tax have been notified,” a ministry official said, referring in particular to the US firms Amazon, Google, Facebook and Apple, which the USA says are being unfairly targeted by the levy.
The French move risks escalating a long-running battle over figuring out how to make American tech MNCs pay a larger share of their taxes in the countries where they operate. Under EU law, American companies can declare their profits from across the block in a single member state – in most cases low-tax jurisdictions such as the Netherlands or Ireland.
Under pressure to take a harder line, France enacted its digital tax in 2019, which calls for a 3 per cent levy on the profits from providing online sales for third-party retailers, as well as on the sale of private data and digital advertising.
But Paris reached a deal with the administration of US President Donald Trump to suspend the tax while seeking a global digital tax deal under the auspices of the Organisation for Economic Co-operation and Development (OECD). Though Trump has warned that punitive duties of 25 per cent on US$1.3 billion worth of French products, including the country’s renowned cosmetics and handbags.
In October, the OECD acknowledged that it would not reach a deal on a new global standard for taxing digital firms this year as hoped, primarily because of the US opposition to the proposals.