In an email to French and Spanish advertisers last week, Google announced a 3% increase in advertising rates on its platform from May, to cover what has been termed the ‘GAFA tax’ in force in both countries. EURACTIV France reports.
“In France and Spain, these fees are intended to cover part of the costs of complying with the digital services tax regulations in force in these countries,” according to the email obtained by EURACTIV France. GAFA refers to the four most powerful tech companies, Google, Apple, Facebook and Amazon.
Given Google’s market share in advertising, the extra cost imposed on its customers will not be negligible.
“The impact is considerable” for all companies, “whatever their size”, Jean-Luc Chetrit, director-general of Union des Marques – a representative organisation of companies that use communication services to promote their products – told EURACTIV France.
Chetrit voiced regret that these additional fees will backfire on businesses, including SMEs, quipping that the government’s objective with this tax was most certainly not to tax Google’s customers, which Chetrit estimates to be 30,000 in France.
“I am currently studying all possible solutions to contest this ‘tax transfer’, the director added.
The ‘GAFA’ tax
The law of 24 July 2019 introduced a tax of up to 3% on revenues from certain services provided by digital companies. It was quickly nicknamed the “GAFA” tax because, effectively, only the American giants are subject to it, since it concerns companies with a €750 million global turnover and a €25 million turnover in France.
However, Google is not the first company to want to pass on the tax cost to customers.
Since October 2019, Amazon has implemented a 3% increase in the rates applied to sellers on its platform in France. Then, in September 2020, it was Apple’s turn to increase fees charged to developers who use its platform to sell apps.
Facebook told AFP that it had no plans at this stage to apply additional fees to French and Spanish advertisers, pending the outcome of international negotiations.
International negotiations long-stalled
France’s Economy Minister, Bruno le Maire, said at the Davos Summit in January that “we will continue collecting a tax on digital giants in France, whether it is international if an agreement is reached, or national if there is no agreement”.
The initial objective of the bill introducing this tax was indeed to apply the tax “until a solution has been found at OECD level”, according to the ministry’s website. Only last October did a report emerge from the OECD discussions, however.
And France, in accordance with its stated intention, has continued to levy this tax – which brought in around €400 million in 2019.
The issue was a source of discord between France and the previous Trump administration, which threatened to apply retaliatory measures targeting French products to protect the interests of American “Big Tech”.
But the new Biden administration now seems ready to return to the negotiating table.
A tax “would allow us to collect a fair share from businesses, while maintaining the competitiveness of our businesses and reducing the incentives (…) for offshore activities that we certainly don’t want to reward,” US Treasury Secretary Janet Yellen recently told a Senate hearing.
For its part, Google has called for “finalising an agreement on an international tax”.
“As the global economy seeks to recover from the pandemic and governments face new fiscal pressures, a concerted solution is needed more than ever to ensure a sustainable framework for cross-border trade and investment,” wrote the head of Google global public policy and government relations, Karan Bhatia.
Bhatia noted, however, that “the central issue is less about how much corporate tax is paid and more about where it is paid,” regretting that “in the absence of a multilateral consensus, the world has seen the development of taxes on foreign companies in recent years”.
The European Commission had also pledged to introduce an EU-wide tax on digital services in the event that an agreement at the level of the Organisation for Economic Cooperation and Development (OECD) is not reached.
[Edited by Zoran Radosavljevic]