French Government Institutes 3 Percent Digital Tax

The French government is going after U.S.-based internet companies, announcing Wednesday (March 6) the introduction of a digital tax that will impact companies including Google, Facebook, and Amazon.

According to a report in CNBC, France’s finance minister announced the 3 percent tax, saying it will apply to about 30 big companies, mainly from the U.S. The tax is expected to yield France $565 million each year, reported CNBC. While the tax is tiny compared to the revenues of those large U.S. companies, it could open the floodgates for legislation of internet companies in other European countries. There is speculation that a European Union-wide digital tax may be instituted, although an EU effort to pass a 3 percent digital tax failed in 2018 with objections by Ireland and Germany. The report noted that the Organization for Economic Cooperation and Development is looking at the global digital tax but doesn’t plan to reach a conclusion on the idea for another year.

The French tax is applicable to companies that have worldwide revenue generated by digital services of more than $847 million and $28 million generated from within France. In a statement to the news outlet, a Google spokesperson said the company always pays its taxes and complies with the tax laws in every country in which it operates. “Google pays the vast majority of its corporate income tax in the United States, and we have paid a global effective tax rate of 23% over the last ten years,” the spokesperson said.

Meanwhile, Facebook said in a statement to CNBC that it too pays all its taxes and will continue to comply with France and European rules. “In France, we voluntarily set up a new sales and invoicing structure in 2018. From now on, all revenues from advertisers supported by our teams in France are recorded in France,” Facebook told the news outlet. “We hope that the OECD will finish its work and create a clear, sustainable global agreement on tax.”