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11 April 2019

GAFA tax: a major step towards a fairer and more efficient tax system

On 8 April 2019, the National Assembly voted to introduce a tax on digital giants, which should make France one of the leading countries in this field. The Governement is continuing to work towards an international agreement on the subject.
 
The purpose of this tax is to achieve a fairer and more efficient tax system, which taxes value where it exists, i.e. in the data, in order to finance public services, schools, nurseries and hospitals. Today, "digital giants pay 14 percentage points less tax than European SMEs. The fact that these companies pay less tax than a cheese producer in Quercy is a real problem," Economy Minister Bruno Le Maire explained in an interview in the Le Parisien newspaper on 3 April.

The tax will affect companies with a worldwide turnover on their digital activities of over €750 million and a turnover in France of over €25 million. About thirty groups will be affected, including but not limited to Google, Apple, Facebook and Amazon (GAFA). It is therefore not an anti-American tax.

It will apply to 3% of digital turnover (advertising revenues, commissions received by the platforms, revenue from the resale of personal data) generated in France from 1 January 2019, leading to proceeds that "should quickly reach €500 million," added Bruno Le Maire.

FOR INTERNATIONAL TAXATION

France is not alone in Europe in taking action on this matter: six other European Union (EU) Member States are setting up or considering similar taxation, and the European Commission backs these plans.

France also wishes to accelerate work within the OECD to change international tax rules. "As soon as there is an agreement within the OECD, these new international tax rules will replace our French tax," Bruno Le Maire pointed out.

The implementation of this tax will not be felt by the consumer, given the desire of platforms to win new customers. Nor do the sources of tax yield justify any impact on customers (targeted advertising activities that do not require any payment from the Internet user and intermediation activities levied at the time of a sale between intermediaries).