Two weeks before a European Council dedicated to innovation and the digital economy, the French Ministry of Finance organised a conference on Wednesday (9 October) focusing on the taxation of internet companies.
The conference was held in the presence of European Commissioner Algirdas Šemeta, in charge of taxation and customs union, as well as the French ministers Fleur Pellerin (SMEs and digital policy), and Pierre Moscovici (economy and finance).
France is keen to push the taxation issue at international level and has launched a campaign to convince EU member states that a common approach was necessary at European level.
Moscovici set the scene by drawing attention to the “Peps” roadmap, adopted by the G20 last summer in St Petersburg, which focuses on the taxation of digital companies as its first point.
“The diagnosis is now well-known: many of those digital companies like Facebook, Amazon or Google use very sophisticated tax optimisation practices that are often legal," said Pierre Collin, co-author of a parliamentary report on digital taxation for the French National Assembly.
But more worrying still is public opinion, Collin said, pointing to the widespread public anger in the UK over the tax avoidance of Starbucks, the global US coffeehouse chain.
Mike Williams, director for international business at the UK treasury, agreed. “It is important that companies contribute a fair share to the country’s taxes, where they take advantage of the infrastructure,” he said.
"Fairness" appeared to be the buzzword at the Paris conference.
Pierre-Alain Muet, who has co-written a report on fiscal optimisation, said “the issue goes beyond digital companies".
"The fact that taxation falls on SMEs because large companies don’t pay taxes creates inequality that is in breach of declaration of human and citizens' rights," Muet stressed.
In Muet's view, Europe is a “fragile giant” when it comes to taxation matters, where the unanimity rule makes any agreement difficult to reach. Meanwhile, he said unfettered tax competition was hurting relations between EU countries.
Google has set up subsidiaries in low-tax countries like Ireland, where regulations are less strict. Like the Netherlands, Ireland has become what has been referred to as a "tunnel state", which allows transfers between the national subsidiaries of the same company.
Seen from Paris, the solution is to establish a common taxation base that would block competition between countries. This is the idea France will put on the table at the October European Council.
“It’s a question of political will. It can be done and the public opinion already supports the idea”, said Véronique Bied Charreton of the French finance ministry.
Algirdas Šemeta, the EU's taxation commissioner, acknowledged the issue was one of the most important in the field of international taxation, noting that current taxation systems were designed well before the computer era.
"We must ensure that the tax system does not weigh on growth, and it is effective enough," Šemeta said. However, he did not seem convinced by the idea of a "Google tax".
“It’s good that France is thinking about it but we don’t want to rush to conclusions. We must take the time to think,” the commissioner said.
Fleur Pellerin, France's digital economy minister, is embarking on a European tour to drum up support for the proposal among France's 27 EU partners.
A first indication of her success will emerge at the next European Council on 24-25 October.