Big tech companies will now be required to pay a 3% tax of total annual revenues to the French government after a Bill targeting GAFA companies — an acronym for Google, Apple, Facebook, and Amazon — was passed on Thursday.
A new 3% tax will be applied to tech companies that make €750 million globally and €25 million in France from public advertising and digital intermediary services to consumers. Online businesses, digital services providers, in addition to companies that provide communication, payment, or financial services are exempt from the 3% tax.
The passing of the Bill comes a day after the US began its investigation under section 301 of the Trade Act 1974 into the then-proposed tax legislation. The US was concerned that the tax would unfairly target US tech companies due to them being global leaders in that market.
“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” US Trade Representative Robert Lighthizer said on Wednesday.
“The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”
By undertaking an investigation through section 301 of the Trade Act 1974, US President Donald Trump has the ability to enforce tariffs against France if it is deemed that the tax harms US companies.
France’s Finance Minister Bruno Le Maire has been pushing for a 3% tax on big tech companies since early 2018, when the EU first began eyeing such a tax in order to prevent profit-shifting to countries with lower tax rates.
Discussions about a union-wide tax had come to a standstill however, with Denmark, Sweden, and Finland opposing the tax. Le Maire in December then said France would look to tax tech giants at a national level in 2019 if the EU could not agree upon a solution to pass the 3% tax, as reported by ZDNet’s sister site CNET, culminating in passing of the new Bill.
Prior to the new tax Bill, the French government and the European Union had already conducted various investigations into Apple, Google, Amazon, and Facebook to determine whether they were avoiding paying tax.
In December, France made a deal with Apple for the company to pay €500 million in backdated taxes after several months of negotiations between the two parties.