France poised to impose 3% digital tax on internet giants

France is preparing to impose a 3 per cent digital tax on internet giants with global turnover of more than €750 million and turnover of more than €25 million in France.

The French finance minister Bruno Le Maire presented his draft law on the tax to cabinet on Wednesday and the text will go to the National Assembly in early April. It will take effect retroactively from January 1st this year.

The tax will apply to the French revenues of some 30 international groups and is expected to raise €500 million annually. This compares to the annual €60 million France takes in corporation tax.

EU Commission figures show European businesses pay 23 per cent corporation tax on average, but this drops to just 9 per cent for internet companies, Mr Le Maire said.

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"We must tax the Gafa [Google, Apple, Facebook, Amazon] to finance our public services, our schools, our creches and our hospitals. It is a question of fiscal justice," he added.

The French law is based on a draft directive drawn up by the EU Commission last year. France lobbied hard for its passage, but Mr Le Maire was unable to convince the Republic, Denmark, Finland and Sweden to accept it.

“Twenty-three out of 27 [EU)]states support it,” Mr Le Maire told a press conference. “But 23 is not 27, and the directive requires unanimity. So there will be no accord . . . It is time to move to qualified majority voting in fiscal matters. If we had QMV, the directive would have passed already.”

Three sources

The tax will be charged on three sources of income: targeted advertising of consumers online, connection services that refer internet users to other websites, and the resale of personal data. But online trading, payment services and regulated financial services will be exempt.

The law was announced in December, at the height of protests by gilets jaunes, or yellow vests, who demand higher taxes on business and the rich.

Mr Le Maire said the tax would be collected on the basis of revenue declared by the companies in France, adding that checks would be carried out if necessary. Experts say the internet companies can easily underestimate their French earnings, and that the government will find it difficult or impossible to check them.

France hopes that its law will set the tone for negotiations at the Organisation for Economic Co-operation and Development on a global internet tax. When he visited Dublin on February 26th, Mr Le Maire said, Minister for Finance Pascal Donohoe told him Ireland would work with France in the OECD.

“Work has speeded up because of France,” Mr Le Maire said. “It is always when France shows her determination that things move.”

Austria, Italy, Spain and the UK also plan national digital taxes.