France adopts digital tax on tech giants like Google, Facebook

France has adopted a pioneering tax on internet giants like Google, Amazon and Facebook despite threats from the U.S.

Tax will be based on revenues earned in France to prevent profit shifting to low-tax zones

French President Emmanuel Macron and the French government have adopted a digital tax on tech companies, despite a U.S. complaint that it 'unfairly targets American companies.' (Olivier Matthys/The Associated Press)

France has adopted a pioneering tax on internet giants like Google, Amazon and Facebook despite threats from the U.S.

Just ahead of the vote Thursday, French economy minister Bruno Le Maire said allies needed to settle differences "without using threats."

The French Senate estimated that the tax could bring in €400 million ($588 million Cdn) this year and €650 million ($955 million) next year.

Late Wednesday, the U.S. administration announced an investigation into the tax under the provision used last year to probe China's technology policies, which led to tariffs on $250 billion US of Chinese imports.

The French digital services tax would impose a three per cent annual levy on French revenues of digital companies with yearly global sales worth more than €750 million ($1.1 billion Cdn) and French revenue exceeding €25 million ($36 million).

"Each of us is seeing the emergence of economic giants with monopolistic attributes and who not only want to control a maximum amount of data and make money with this data, but also go further than that by, in the absence of rules, escaping taxes and putting into place instruments that could, tomorrow, become a sovereign currency," Le Maire said.

Companies currently pay nearly no tax

The bill aims to stop multinationals from avoiding taxes by setting up headquarters in low-tax EU countries. Currently, the companies pay nearly no tax in countries like France where they have large sales.

The tax primarily targets those that use consumers' data to sell online advertising. 

The tech industry warns it could lead to higher costs for consumers. The levy could affect U.S. companies including Airbnb and Uber as well as those from China and Europe.

Ahead of the vote, U.S. Trade Representative Robert Lighthizer expressed concern that the tax "unfairly targets American companies." Lighthizer's agency will investigate the tax under Section 301 of the Trade Act of 1974.

Bob Atkinson, president of the Information Technology and Innovation Foundation, issued a statement welcoming Lighthizer's investigation. "Digital services taxes are an ill-disguised effort to target companies that are thought to be too powerful, too profitable and too American," Atkinson said.


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