France passes controversial new “digital services” tax on tech companies

The French Senate has passed a new tax that will see large tech companies required to pay tax on their total annual revenue generated by providing services to French users.

Tech companies with more than EUR 750 million (GBP 674 million) in global revenue and EUR 25 million (GBP 22.5 million) in French revenue required to pay a 3 per cent tax on total annual revenue.

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The tax will affect big brands including Amazon, Facebook and Google after widespread public anger over some firms’ tax avoidance.

The European Commission estimates that on average traditional businesses face a 23 per cent tax rate on their profits within the EU, while internet companies typically pay 8 per cent or 9 per cent.

Speaking back in May to Le Parisien newspaper, French Finance Minister Bruno Le Maire said around 30 companies will be affected by the tax, and the majority will be American, although Chinese, German, Spanish, British and one French firm will also be expected to pay.

It’s thought Uber, Airbnb, Booking.com and French online advertising specialist Criteo are also targets.

The tax will yield French authorities around EUR 500 million (GBP 449 million) per year, and is applied to commissions that internet platforms charge on sales made through them, and to revenue from targeted advertising and the sale of user data — but notably, not to direct internet sales to consumers.

It means as Amazon acts as a digital intermediary between a producer and a client it would have to pay, but retailers that sell directly to clients wouldn’t.

Depending on how well the tax is received globally, it’s likely other European counties will now follow in France’s steps.

In Britain, retail groups have called on the government to tax online retailers in order to even the playing field with traditional bricks and mortar retailers burdened with rising business rates on high street stores.

The French government has added that the tax will end if a similar measure is agreed internationally, with an EU levy also currently under debate.

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