(Bloomberg)—French lawmakers will start debating on Monday a tax meant to force Internet giants like Amazon.com Inc. (No. 1 in the Internet Retailer 2018 Top 1000) and Facebook Inc. to pay a 3% levy on digital turnover.
Parliament will discuss the tax, which targets companies with 750 million euros ($842 million) in worldwide revenue and 25 million euros ($28.2 million) of French digital sales, over the next several weeks. The levy, described by Finance Minister Bruno Le Maire as ensuring “ fiscal justice,” is expected to become effective starting Jan. 1.
French President Emmanuel Macron got support from the European Union’s competition chief Margrethe Vestager, who has imposed major fines on companies including Apple Inc. (No. 2) and Alphabet Inc. In an interview with France Inter on Monday, she said the best solution for taxing large Internet companies was to start in Europe.
“The best thing is a global solution, but if we want solutions in a reasonable time, then Europe must step forward,” said Vestager, who is in Paris and plans to meet with Macron’s chief of staff. “France is showing the way.”
A broad, Europe-wide digital tax failed to garner a consensus in the 28-nation EU, which has led several countries, including the U.K., Spain, Austria and Italy, to consider implementing their own version of the levy.
Pierre Moscovici, the EU Commissioner on Economic and Financial affairs, lamented the fact that the EU hasn’t been able to come together behind a single tax regime. “Countries, that represent maybe 5 or 8% of the EU’s population, have blocked it for everyone,” he said on France Info radio on Monday. “If we go on like this, we’ll never manage.”
U.S. Secretary of State Mike Pompeo asked the French to drop the tax all together, arguing it “would negatively impact large U.S. technology firms and the French citizens who use them.” His French counterpart Jean-Yves Le Drian asked the U.S. to increase its commitment to the Organisation for Economic Cooperation and Development’s efforts to seek a global solution to the taxation of large Internet companies.
The Paris-based OECD has warned that failure to reach a global agreement on how to tax the digital economy could lead to “international tax chaos.” The organization is working on a draft deal, which it says will be officially ready next year.
Details on the proposed French tax:
The tax is due in April of each year, and is to be paid in two installments. In 2019, both installments will be due in late October, according to the bill. The French government will tax online marketplaces, the sale of data for targeted advertising, and the sale of targeted online advertising. The tax is to be pro-rated based on the number of users companies have in France, but there is no information about how this would be calculated. Activities that won’t be taxed are direct e-commerce retailing, messaging or payment apps, and online advertising that doesn’t involve user data. Companies will be allowed to offset the tax against French corporation tax. The government said the tax will be an interim measure applied until a global consensus on taxing the digital economy is reached. The measure is expected to bring in 500 million euros ($563.2 million) annually. Lawmakers in Macron’s government are considering 3-year sunset clause.