France to go it alone on digital tax plans

French Finance Minister Bruno Le Maire reacts before his speech on tax issues at a joint hearing with lawmakers of the economic affairs committee and the special committee on financial crime of the European Parliament in Strasbourg, France, 23 October 2018. [EPA-EFE/PATRICK SEEGER]

France is to join a growing list of member states setting out their own plans for a digital tax, after the country’s Finance Minister Bruno Le Maire announced on Monday (17 December) that new French laws for the taxation of digital giants would come into effect from 1 January 2019.

Speaking at a press conference in Paris on Monday, Le Maire told reporters that the French measures would go further than plans currently being debated over in the EU Council of Ministers, by extending to “advertising revenues, platforms and the resale of personal data”.

Le Maire is striking while the iron is hot. While the tax legislation at an EU level requires unanimous agreement in the Council, recent discussions between European finance ministers have failed to reach a consensus on the plans.

MEPs back digital tax plans by overwhelming majority

MEPs in the European Parliament have signalled their support in clear and uncertain terms for the taxation of digital services, during a vote in Thursday’s plenary session (13 December) in Strasbourg.

A bid to calm the caos?

Moreover, Le Maire is facing his own domestic tax challenges as the ‘Yellow Vests’ movement continues across France.

The demonstrations, which originally took place over disputes related to the government’s hikes in petrol and diesel taxes, have since wreaked havoc across the country, causing damage to public property and conflicts with police forces.

Le Maire’s Digital Tax announcement comes amid this backdrop, with pressure to ease the swathes of public discontent against the fuel tax hikes most likely playing a part in his announcement to put the digital levy in place by January 1.

“The money is with the digital giants, which make considerable profits thanks to the French consumers, and who pay 14 tax points less than other companies,” Le Maire said in December, as reported by French TV channel BFM TV. The Frenchman added that the new tax could bring in up to  €500 million per year.

France and Germany backtrack on digital tax scope

France and Germany presented on Tuesday (4 December) revised plans for the EU’s proposed digital tax reforms under which large firms would pay a levy only on advertising sales and not on total revenues, representing a significant reduction of the Commission’s original scope.

Parliament pressure

The news comes a week after MEPs in the European Parliament signalled their support for the taxation of digital services, during a vote last week.

Two proposals were supported by Parliament that will see the threshold of minimum taxable revenues within the EU lowered to €40 million from the commission original proposal of €50 million, a 5% tax rate imposed rather than the Commission’s 3%, and the inclusion of online streaming services under the scope of the plans.

As part of the measures supported by Parliament, firms with total annual revenues of €750 million or above will be hit by the levy and companies would pay tax in the country where the revenue is sourced, rather than where they are domiciled for tax purposes.

However, the European Parliament only plays a consultative role in tax legislation, with the final decision on such matters taken by unanimity in the European Council.

With member states such as Ireland, Sweden, Denmark, and Finland opposing the plans so staunchly, any consensus in the Council was always going to be difficult to achieve. A fact that has led a number of nations, such as Spain and the UK, to pursue their own digital tax measures. France has just added its name to that list.

Last week, EURACTIV sat down with the rapporteur for the digital tax plans, Socialist Paul Tang, who came out in criticism of Bruno Le Maire’s backtracking on the proposals, after attempting to strike a deal with Germany’s Olaf Scholz that would have seen a significant watering down of the Commission’s original plans for a digital tax.

“I would have wanted Le Maire to be more determined on this issue,” Tang said.

“He started off well, but has since watered down his proposals, settling for a mere symbolic gesture.”

With Monday’s digital tax announcement, Le Maire’s ‘symbolic gesture’ now looks to have transformed into an altogether more tangible and definitive plan.

However, not all have been satisfied with France’s announcement. Joe Kennedy, Senior Fellow at The Information Technology and Innovation Foundation (ITIF), a leading think tank for technology policy, came out in criticism of the plans.

“The claims that digital companies are undertaxed or that the digital economy can be ring-fenced and subject to different tax rules than the rest of the economy have both been discredited,” he said.

France and Germany aim to keep digital tax alive with new proposal

France and Germany sought on Monday (3 December) to salvage a proposed EU tax on big digital firms by narrowing the focus to cover only companies’ online advertising revenue, a European source said.

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