French parliament approves tax on digital tech giants

French digital service tax target US companies unfairly says administration

U.S. to hold hearing on French tax investigation Aug. 19

France argues these firms have long benefited from global tax loopholes that aggressively minimize their tax bill in countries where they aren't headquartered.

The U.S. Trade Representative's (USTR) Office will hold a hearing on Aug 19 in its probe of France's new arranged tax on huge technology organizations, calling the proposal "unreasonable".

France's digital-services tax, which was approved by the French Senate on Thursday, would require tech firms with revenue of more than $845 million to pay a 3% tax on their French sales.

But French Economy Minister Bruno Le Maire France rejected the U.S. reaction, saying "threats" were not the way to resolve such disputes. "I firmly believe that, between allies, we can and should be able to settle our differences without threats", reported Efe news.

Other EU countries including Austria, Britain, Spain and Italy have also announced plans for their own digital taxes. And a bigger dispute is unfolding about the very nature of national taxation regimes in an increasingly digitalised world. Political strain to react has been developing as local retailers in high streets and online have been disadvantaged.

And as more trade migrates to online platforms, there is no question that the United States retail giants are in a position to consolidate their advantage.

The Computer & Communications Industry Association on Wednesday applauded the US Trade Representative's move, saying the tax would retroactively require US internet giants operating in France to turn over a percentage of their revenues from the beginning of this year and violates worldwide trade commitments.

An activist wearing a mask depicting Facebook chief executive Mark Zuckerberg in Belgium past year. These companies, protesters claimed, were destroying the country's traditional family-run shops.

CIGAINERO: The French government estimates it will rake in up to 650 million euros a year.

Some experts said the costs of compliance could add up for tech firms, especially if more European Union countries push through their own national taxes. The tax will hit about 30 companies, including major Irish employers Apple, Facebook and Google.

Britain and the United States could be on a collision course over taxing internet giants.

The tax will be retrospectively applied from early 2019, raising around €400m ($450m) for the French government this year.

Paris-based tax lawyer Jessie Denton told BBC that this tax is more of a "symbol" than an effective tax measure, as it raises a relatively small sum of money. Chinese, German, Spanish and British firms are also affected, as well as the French online advertising firm Criteo.

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