New taxes from France on US technology giants

Get real time updates directly on you device, subscribe now.

French tax authorities have begun to send notifications to large American companies about the need to pay a new tax for technology giants . The Financial Times writes about this.

This is a tax of 3% for technology companies with an annual turnover exceeding 750 million euros worldwide and 25 million euros in France. The decision to introduce such a tax was made early last year. The United States soon announced that the tax would have to be paid mainly by American companies, including Google, Facebook, and Amazon. In this regard, the United States promised to impose duties on goods from France in response. As a result, in January of this year, French resident Emmanuel Macron announced that he had reached an agreement with US President Donald Trump: the leaders of the two countries agreed that France would postpone the introduction of the tax until the end of 2020 to settle differences with the American authorities.

However, the US Treasury withdrew from negotiations on this issue in June 2020. A month later, the US announced a 25% duty on French cosmetics and bags in response to the introduction of a digital tax. The duties, which will affect goods worth $ 1.3 billion, will affect January 6, 2021. At the same time, earlier in the United States, they also threatened to introduce 100% of champagne and cheese imported from France.

Among other companies, Amazon and Facebook received notifications about the new tax from the French authorities. It affects about 30 large companies, including Google, Apple, Uber, Airbnb, Booking, and others.

Experts note that the American administration’s change in connection with the victory of Joe Biden in the presidential election will not lead to a quick cancellation of new duties. However, it can be assumed that under the new president of the United States, negotiations on the new tax, which the Senator from the Democratic Party Ron Wyden called “discriminatory”.

As a reminder, the Organization for Economic Cooperation and Development (OECD) drew attention to the unfair distribution of taxes by multinational technology companies back in 2015. Developing approaches to solving the problem has become the main goal of the G20’s plan to counter the base erosion and profit shifting (BEPS).

The OECD is considering three options for solving the problem. The first is to oblige companies to show a portion of the profits in the countries of residence of users, even if they do not have an office there. However, this raises the question of determining the share of profits that falls in a particular country. The second option is to recognize intangible assets as created in the country where the company operates. In this case, the authorities will tax all or part of the profits from such assets. Finally, the third option is to determine the degree of the company’s economic presence in the country depending on the amount of revenue, the presence of a local user base, website support in the national language, online sales, etc. In this case, the income of companies with a significant economic presence may be taxed.

Other countries are considering the possibility of introducing similar digital taxes. Thus, the UK authorities intend to start levying such a tax in April next year.

Source : French Agencies