France is going forward with its plan to tax big tech companies. The government has sent out notices to tech giants, as reported by the Financial Times, Reuters and AFP. There could be retaliation tariffs on French goods in the U.S.
For the past couple of years, France’s Economy Minister Bruno Le Maire has been pushing hard for a tax reform. Many economy ministers in Europe think tech companies aren’t taxed properly. They generate revenue in one country, but report to tax authorities in another country. They take advantage of countries with low corporate tax to optimize the bottom line.
Le Maire first pitched the idea of a European tax on big tech companies based on local revenue. But he failed to get support from other European countries — European tax policies require a unanimous decision from members of the European Union.
The French government chose not to wait for other European countries and started working on its own local tax. There are two requirements:
- You generate more than €750 million in revenue globally and €25 million in France.
- And you’re operating a marketplace (Amazon’s marketplace, Uber, Airbnb…) or an advertising business (Facebook, Google, Criteo…).
If you meet those two requirements, you have to pay 3% of your French revenue in taxes.
At the same time, the OECD has been working on a way to properly tax tech companies with a standardized set of rules that would work across the globe. But OECD members have yet to reach a compromise.
France and the U.S. have been arguing on and off for the past couple of years about the tech tax. In August 2019, then U.S. President Donald Trump and French President Emmanuel Macron reached a deal by promising that the French government would scrap the French tax as soon as the OECD finds a way to properly tax tech companies in countries where they operate.
In December 2019, the U.S. promised 100% tariffs on French wine, cheese and handbags because the previous deal wasn’t good enough. In January 2020, the two sides agreed to wait a little bit to see if the OECD framework would come through.
And here we are. According to the French government, OECD negotiations have failed, so it’s time to start collecting the French digital tax. Let’s s see how the U.S. reacts during the Trump-Biden transition.