France’s tax on tech giants is happening

Is it happening? Is it not happening? After years of back and forth, it looks like the new tax on tech giants in France is about to become a law. Big tech companies that generate significant revenue in France will be taxed on their revenue generated in France.

Economy Minister Bruno Le Maire has been lobbying for a new tax so that tech giants would stop optimizing their European corporate structure to lower their effective tax rate. Originally, Le Maire wanted to convince other European countries to get on board.

But you need a unanimous vote when it comes to tax reforms in Europe. And Le Maire couldn’t convince everyone.

Le Maire still wanted to do something. So here we are, with a new tax on tech companies that generate more than €750 million in revenue globally and €25 million in France.

If you’re operating a marketplace (Amazon’s marketplace, Uber, Airbnb…) or an advertising business (Facebook, Google, Criteo…), you will have to pay 3 percent of your French revenue in taxes. The government says that it isn’t against American companies, as European and Asian companies are also about to get taxed.

It’s a weird taxation model as it is based on revenue and not profit. It’ll also require some work from the taxation administration, as French revenue means that it involves all transactions with somebody with a French mailing address or a French IP address. France expects to generate €400 million in revenue with this new tax in 2019.

I’ve been talking about this new tax with people in the French tech ecosystem and they think it’s a publicity stunt more than anything else. The OECD has been working on a way to properly tax tech companies with a standardized set of rules.

It could still take a couple of years, but it would be based on profit and it would clarify the situation across dozens of countries. It would replace today’s new tax.

Don’t get me wrong. Taxing tech giants is important and tech companies have been fined for tax avoidance for too many years. But this feels a bit rushed.