France angers United States with approval of tax targeting tech giants


The French government has introduced a tax aimed at large online companies like Amazon.

Also on Thursday, Britain moved ahead with similar plans as the government published draft legislation for a "digital services tax".

"It's a taxation on revenues (and not on profits), encouraging companies to reduce their level of investments and innovation", he said.

France insists that the tax - likely to raise about €400m this year alone - does not seek to target just U.S. companies and will affect European and Asian firms as well.

President Donald Trump has ordered an investigation into the digital tax.

France pushed ahead with the tax after European Union countries failed to agree to a levy valid across the bloc in the face of opposition from Ireland, Denmark, Sweden and Finland.

In Britain and France, for instance, it is estimated that Amazon paid an effective corporate rate tax in the past few years of just 0.1 per cent on its turnover, an astonishing 20 to 30 times less than the tax burden of traditional retailers. This is a tax charge for the largest digital businesses - search engines, social media platforms and online marketplaces - with global revenues over £500m and United Kingdom revenues over £25m to reflect the revenue derived from their United Kingdom users.

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Earlier this year, the European Commission outlined proposals for a 3pc tax on revenues of large internet companies with global revenues above €750m per year, but this move was met with the same criticism that met France's decision from those who believe that this type of tax breaches worldwide rules on equal treatment for companies around the world.

Paris-based tax lawyer Jessie Denton told BBC that this tax is more of a "symbol" than an effective tax measure, as it raises a relatively small sum of money.

Tech giants face payments in the tens of millions under the measure.

For comparison, Apple raked in more than $13 billion in sales in Europe in the first-quarter of the year, while Facebook's European revenues were $3.65 billion during that period.

The French parliament has adopted a new tax targetting giant tech companies operating in the country, in defiance to a warning against the same by the United States of America.

"We must act against the perverse effects of a regulatory and fiscal framework that allow digital giants to grow without any limits and without any control", French Finance Minister Bruno Le Maire said when he introduced the bill earlier this year. "France is a sovereign country". The Organization for Economic Cooperation and Development (OECD) is now reviewing steps to modernize the tax system for the digital economy but has said it won't reach a conclusion until 2020.