French digital service tax target U.S. companies unfairly says administration

Expect a lot of legal challenges said Giuseppe de Martino president of the French tech industry group ASIC. Stock image

The digital tax will not apply to small businesses or those making a loss, protecting start-ups that are financially more volatile.

The tax will be introduced in 2020 and will be €1.50 on economy-class tickets, both within France, and between other European Union countries.

She said that, in light of growing concerns about carbon emissions from trains, "France is committed to the taxation of air transport but there is an urgency here". The tax will hit about 30 companies, including major Irish employers Apple, Facebook and Google. The French government has indicated it will drop the measure once the OECD reaches agreement on global plans for overhauling cross-border tax rules for the digital economy, although these are not expected until 2021. In October 2018 the United Kingdom government's 2018 Budget included a proposed "Digital Services Tax" which would be 'a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models' - primarily as a means of closing a loophole which has seen companies like Google dodge billions in tax. France forecasts that the tax could bring in as much as €500m a year.

The proposed tax was first mentioned in the October budget after concerns were raised that tech giants don't pay enough tax in the United Kingdom, in comparison to United Kingdom companies.

On Thursday, the French Senate approved the 3% levy that will apply to revenue from digital services earned in France by firms with more than 25 million euros in French revenue and 750 million euros worldwide.

They argued that America's argument that the companies, also including Apple, are already being taxed at their headquarters in the USA and should not be subjected to another tax.

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Tech giants face payments in the tens of millions under the measure.

"France is a sovereign state, it decides its fiscal provisions in a sovereign manner, and it will continue to decide its tax decisions in a sovereign manner", French Finance Minister Bruno Le Maire said in Parliament, according to the Washington Post. In the first quarter of this year, for instance, Amazon's share of French e-commerce went down slightly, but the American retail behemoth still controlled no less than half of France's online trade.

"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies", US Trade Representative Robert Lighthizer said in a statement.

France argues the digital tax is a temporary measure until a broader agreement among countries is reached.

But, she added, other countries are already looking at new taxes on big tech companies.

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