GAFA Tax: France hits back on the US by imposing tax on Google, Apple, Facebook, and Amazon
France has decided to impose a tax on major tech giants, saying that threats aren’t the way allies should resolve issues.
In an attempt to hit back at a US investigation, France has decided to impose a tax on major internet companies, saying that threats aren’t the way allies should resolve issues.
On Thursday, the French parliament approved of the law that would make France the first major economy to impose a tax on internet companies, called the ‘GAFA’ tax, an acronym for Google, Apple, Facebook, and Amazon.
A 3% levy on the total revenues of the largest technology firms that provide their services to consumers residing in France will be imposed by the legislation.
A new front seemed to have opened in a trade row between Washington and the European Union by the law on Wednesday when the president of the United States, Donald Trump ordered an investigation of the tax. This could have led to the US imposing trade restrictions or tariffs on France.
“Between allies, I believe we can and must resolve our differences in another way than through threats”- Bruno Le Maire, the finance minister of France, answered when he spoke to the French senators on Thursday.
“France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign” – he added.
Bruno also said that he was informed about this investigation in a lengthy conversation with Steven Mnuchin, the US Treasury secretary, earlier this week. He said that it was the first time in the history of the relationship between France and the United States that the US administration had decided to open an investigation of this nature into the legislation of France.
Earlier this year, he said that imposing a 3% tax on the French revenue of big companies could bring in €500m yearly.
After France, UK plans the same:
A similar tax on digital services is being planned by the UK. It will be imposed on online marketplaces serving customers from UK, social media platforms and search engines and the tax will come in force from next year. It will be applied to companies with global revenues of more than £500m and at least £25m revenue from UK activities.
These proposals were included in the Treasury’s latest draft finance bill that was made public on Thursday. It is also out for consultation and could risk the same reaction from the US as France.
France has caused internet companies with noteworthy digital revenue in the EU to pay more tax but has made minimal progress as member states with low corporate tax rate like Ireland and Luxembourg oppose the proposal while Germany agrees to it.
However, as per France, it continued independently with its own tax because companies like Facebook and Amazon, which are big internet companies, are able to make profits in countries with low tax, no matter where the revenue instigates from.
Paris has promised to decrease its tax soon after an international agreement is reached the Organisation for Economic Co-operation and Development to renovate old cross-border tax rules for the new, digital age.
Élysée officials say that the novel tax is fair and the reason why it is held up by the government is to address calls for tax justice from Gilets Jaunes (yellow vests) protestors. Bruno Le Maire said that the tax will target 30 companies, which are mostly American – including Google, Apple, Facebook, and Amazon but also British, German, Spanish and Chinese ones and one French firm and numerous others with French origins that have been purchased by foreign companies.
The tax will impact companies with €750m in revenues annually and earn from digital business including online advertisement.
“We are merely re-establishing fiscal justice. We want to create taxation for the 21st century that is fair and efficient. We want to impose on these new business models the same rules that apply to all other economic activities.” – Le Maire told the senators on Thursday.
Donald Trump can use the Paris-Washington digital tax spat to try and get EU concessions on trade as it is far from a long-running trade row.
Tariffs of billions expected on food, tractors, and planes:
Both the US and EU have threatened to impose tariffs of billions of dollars on food, tractors, and planes in an almost 15-year dispute at the World Trade Organization over aircraft subsidies which is given to the US planemaker Boeing and its European rival Airbus.
Trump has also imposed tariffs on EU steel and aluminum imports and also has threatened duties on auto parts and cars if the two sides are unable to reach an overall trade deal. The plans to open trade talks between Brussels and Washington have been hindered by the US’s tariffs on steel and by the EU states’ unwillingness to include their farm products in the discussions.
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