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Eye On France: A tax the world has been waiting for . . .?
France is going to tax the Internet giants (Google, Apple, Facebook and Amazon, collectively known as Gafa), starting on January 1st.
The finance minister, Bruno Le Maire, had been hoping to have the support of the rest of the EU. That was slow in coming, since no one wants to risk offending companies with a combined turnover greater than French GDP. Undaunted, in the absence of European reinforcements, and badly strapped for cash, Paris has decided to face the big boys in single combat.
That, assuming France isn’t simply wiped out, will bring in 500 million additional euros.
Google have already said they will pay any new French tax, without going into too many details until they know how much they’ll actually be liable for.
The company declared 325 million euros in France last year, and paid 14 million in company tax. But Google’s income from French advertising in 2018 was two billion euros. So a lot will depend on how Bruno Le Maire’s accountants decide to calculate the amount due.
Making money disappear
Basically, the tech companies currently pay tax at the rate of 9 percent, against a European average of 23 percent for businesses in other sectors. But they’re very good at making money disappear. The French have been campaigning for a Europe-wide tax of 3 percent of Gafa turnover, with no hiding the money under a mattress. Whatever is earned in Europe gets taxed in Europe.
President Donald Trump’s fiscal reforms have made it easier for the Gafa monsters to send their mountains of money home.
They do this by buying their own shares, to the tune of 115 billion dollars since the start of the year, according to the Financial Times. That has the advantage of keeping the cash from European taxmen at the same time as it boosts US share values and keeps the Nasdaq technology index at astronomical levels.
Madrid and Rome are anxious to impose their own taxes if Brussels can’t get its act together. Berlin is worried that playing rough might have a negative impact on German exports to the United States. Ireland, Denmark and Sweden, each of which have special reasons for selfishness, are against any Europe-wide regulations.
The Irish have used their favourable tax regime to attract the European headquarters of both Google and Apple to Dublin.
Denmark wants an intelligent tax, not just a bigger chunk of digital profits. And is scared about American reprisals. Sweden wants to protect its home-grown music streaming service, Spotify, which would be subject to the same new tax regulations as the US companies.
A major part of the problem is that EU rules require that this sort of taxation legislation be unanimously approved. If one country refuses the changes, then they just won’t happen.
The French decision to go it alone does not mean that a broader European regulation is dead in the water. Bruno Le Maire says he’s still going to fight for a continental agreement, but Paris needs the money now and is going to start collecting it from the end of this month.
Even that may prove to be beyond the minister’s means.
No need to worry, Gafa!
If Le Monde is to be believed, there is no mention of a Gafa-tax in this year’s budget statement, nor in the hastily-drafted law to activate the urgent social and economic measures promised last week by President Macron. So the first chance for a vote on French legislation to tax the techs will be in March.
Unfortunately, Le Monde quotes Valérie Rabault, leader of the Socialist group in the French National Assembly, as saying that the constitutional watchdog will not allow laws to be passed retrospectively. In other words, the government cannot impose a tax from 1 January, and pass the law justifying that tax in March. The minister says it will not be retrospective, since the law will cover the whole year.
Eric Woerth, the right-wing president of the French parliament’s finance commission, finds the whole thing a bit surprising. “We were told for several months,” he explains to Le Monde, “that this sort of law could be passed and enforced only at European level. Now, suddenly, everything is possible.”
It looks as if Gafa and their shareholders can rest easy for a while to come.
And they’ll probably go on getting richer, whether Europe likes it or not.
According to a United Nations study, reported in today’s business paper Les Echos, four billion people, that’s more than half the world’s population, now have access to Internet. And there are more mobile telephone accounts than there are human beings.
The good news is that all that competition means that the global price of mobile communication is decreasing at the rate of about 6 percent every year . . . the average price of a subscription was 15 dollars in 2008. That was down to 10 dollars by 2015. And prices have more-or-less stabilized since.
In case you are wondering, at 3 dollars for one hour of blather and 100 text messages, China and India are the places to be if you are very attached to cheap mobile communication. The United States are to be avoided, at 44 dollars for the same sixty minutes of talk and one hundred texts. And France, at 34 dollars for the same deal, is clearly not a patch on either India or China.
And, of course, more phones and the rapid spread of broadband means more money for our old friends Google, Apple, Facebook and Amazon.