What companies are affected?
Companies with €750 million and over in annual revenue via digital business, with online business and online advertising included, will be affected. Companies such as Alphabet’s Google, Apple, Facebook and Amazon.com will likely fall under this new tax whereas previously the companies were taxed on physical revenue not digital.
Tump has announced a probe into the tech tax, and this could result in France received new tariffs or trade restrictions as a retaliation. The inquiry has been welcomed by Republican Senate Finance Committee Chairman Chuck Grassley and Senator Ron Wyden, the senior Democrat on the panel. They commented in a joint statement “The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers.”
What will Happen to France?
Currently, France stands alone on this matter but hope for an outcome of other countries following the example of this tax so as to not be exposed. The UK, Spain and Austria are researching and considering similar laws but are not as advanced as France. Alternatively, France can hope that this bold move will call attention for a multilateral agreement on how digital firms are taxed worldwide.
Why Take on the US and Target Tech Giants?
With current taxation laws, tech giants pay little or no corporate tax in countries where they do not have a large physical presence. The European Commission estimates that roughly traditional businesses face around 23% tax on profits, while internet companies pay roughly 8% or 9% in the EU. The new tax will focus on revenue created in the country rather than profits that are usually declared in headquarters set up in other countries.
The government of France state they will end the tax if a similar measure is agreed upon internationally.