France is not backing down on implementing a new digital tax, which has stirred controversy. France sent out notices to big tech companies and others covered by the tax. The companies were informed that they would have to pay taxes if they want to continue doing business in France.
The tax is strongly backed by the French Economy Minister Bruno Le Maire. He argues that big tech companies are not adequately taxed in Europe.
The problem is that the big tech companies like Amazon, Alphabet, Facebook, and Microsoft, exploit a loophole in European Union law.
Where there’s a loophole, corporate will exploit
The loophole allows the companies to generate a lot of revenue from Europe and report the earnings to just one tax authority in one specific country, like Ireland, where the corporate tax policy is low. They eventually end up paying fewer taxes than they would if they were to report to each country where the revenue was generated.
Le Maire pushed to have a Europe-wide tax on big tech companies based on local revenues in each country. The proposal has been discussed by the Organization for Economic Cooperation and Development for several years, but it failed to get support from other countries.
Again, the problem is that European tax policies have to be unanimously agreed upon by all EU members to go through.
Murky waters ahead
Negotiations between European governments are still ongoing. However, France decided to go ahead and create a local tax on tech firms. The tax applies only to companies that operate a marketplace in France.
This accounts for companies like Apple, Amazon, Uber, or ad businesses like Facebook and Google. The companies must generate at least €750 in global revenue annually, with at least €25 million generated within France.
Many people support the tax in Europe, but the U.S. has been less welcoming.