Trump on course for new trade war with France

Liberty

France's Finance Minister Bruno Le Maire sent a clear message to the USA and the rest of the world on Thursday when the country passed a 3% tax on the digital revenues of big tech companies: "France decides its own tax rules".

Although US Internet commerce giants face an increasingly stiff challenge from both regulators and local retailers, they continue to dominate European online markets.

"Countries are sovereign on tax matters".

They say a levy is needed because big, multinational internet companies such as Facebook and Amazon are now able to book profits in low-tax countries like Ireland, no matter where the revenue originates.

An activist wearing a mask depicting Facebook chief executive Mark Zuckerberg in Belgium past year. When in place, the proposed United Kingdom digital services tax will target "large digital businesses" that generate more than £500m in global revenue and more than £25m in United Kingdom revenue, upon which it will impose a 2% levy.

Global governments have been proposing tax reforms for businesses providing cross-border digital services for years, with European Union finance ministers proposing a dedicated tax back in September 2017. The government projects that the tax will add £275 million to the public coffers in the coming financial year, providing it is enacted as planned in the 2020 Budget, rising to £440 million by 2023.

Still, the backlash against them is serious. Such companies will have to pay a tax of 3 %, earning the French treasury an estimated 400 million euros this year alone.

Dubbed the Gafa tax - an acronym for Google, Apple, Facebook and Amazon - the legislation will target companies with at least €750m (£675m) in annual revenues and apply to revenue from digital business, such as online advertising. Mr Boris Johnson, the man most likely to become the country's new prime minister by the end of this month, vows to hit the companies harder.

Britain and the United States could be on a collision course over taxing internet giants. Taxing revenue is meant to counter the complex arrangements most U.S. tech firms have in place to avoid paying high taxes on their profits.

The tax will be retrospectively applied from early 2019, raising around €400m ($450m) for the French government this year. 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. The French levy is 3 per cent, but the British plan to levy only 2 per cent tax, and the Germans have been noticeably silent altogether.

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