French-inspired ‘Google tax’ to be debated at EU level

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MEPs from the ruling French Socialist Party have urged the European Commission to push for a Google tax, inspired by the Tobin tax on financial transactions. The idea could be debated at the next EU summit in October.

French Socialists and digital industry leaders welcomed on Tuesday (10 September) an opinion delivered by CNNum – “Conseil National Numérique”, a French advisory committee on the digital economy – rejecting the idea of a national tax on the digital sector.

CNNum has been deliberating the issue since March and declared itself opposed to a national tax on the sector, saying it would likely "penalise the French ecosystem” and "compromise the position of France in international negotiations".

Nevertheless, the Council supports France in its efforts to mobilise partners on a European level to overhaul the taxation framework and adapt it to the digital sector.

“A national tax in one country will not make that country very powerful in international talks”, says CNNum President Benoît Thieulin.

The vice-president of the Council, Godefroy Beauvallet, went on to explain that “you need to gather at least a few countries who are willing to play the game, like it was the case with the Tobin tax on financial transaction”.

In the meantime, the Council is in favor of tighter controls on internet giants who have "unusually aggressive" behaviour on tax issues, a view which is shared by the French Socialist delegation in the European Parliament.

“Faced with these companies, we need action on a European level, whether all 28 together or through closer cooperation”, said Catherine Trautmann, head of the delegation.

“We recommend that the next Council of European Ministers dedicated to the digital questions, on 24 and 25 October, tackles this question”, she added. “Countries alone are nothing but a toy in the hands of finance and multinational companies. If they want power balance, states need to organise and work together”.

Google, Facebook, Apple pay minimal taxes

The circumvention of taxes by big multinational companies, including internet giants like Google and Amazon, has irked governments of all political colours.

The UK's Conservative prime minister, David Cameron, said at the World Economic Forum in Davos last year: “I am a liberal, I am not in favour of heavy taxes, but each company should pay a fair contribution to the country where it operates”.

After the EU summit in May this year, French President François Hollande and Cameron alluded to the technology giants' fiscal responsibilities.

>> Read: Europe takes aim at digital giants’ tax swerves

In France, the tax administration authority is suing Google as part of a long legal battle that began in 2012. The Finance Ministry allegedly claims more than €1 billion from the internet giant, whose profits in France reach hundreds of millions of dollars each year, according to the weekly newspaper 'Le Canard enchaîné'.

According to other media sources, Facebook paid only €191,133 of income tax in 2012 in France, where the company has 26 million active users each month and a turnover of around €300 million, BFM TV reported on Tuesday (10 September).

According to the television channel, the social network is using the same methods as Google or Apple, through a French affiliate company that does not sell advertising directly but provides simple " marketing services".

This allowed Facebook to declare a turnover limited to €7.6 million in 2012 in France, while the bulk of its activity is registered with an Irish subsidiary, which in turn pays significant royalties to another subsidiary owned by a company housed in the Cayman Islands.

Representatives of the French digital sector took note “with satisfaction” of the CNNum's opinion saying that “international tax harmonisation should be considered the best way forward”.

The French government plans to convene an international conference on the issue ahead of a European summit dedicated to the digital sector, scheduled for 24 and 25 October.

Google is embroiled in two key disputes with the European Commission.

In November 2010, the Commission launched an antitrust investigation into allegations that Google had abused a dominant market position in the internet search market.

The probe followed a complaint by Google’s rival Microsoft, and remains subject to negotiation between the Commission and the search giant.

The second probe relates to data privacy matters.

A formal letter sent on 16 October 2012 by 24 of EU's 27 data regulators plus those of Croatia and Liechtenstein called for Google to make changes to its new privacy policy to protect the rights of its users.

This followed EU Justice Commissioner Viviane Reding's publication in March2011 of new privacy rules for personal data held on the Internet, including a "right to be forgotten" that would allow users to permanently delete data held by companies.

  • 24-25 October : EU leaders summit in Brussels to debate the digital economy

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