18 December 2018

Google, Apple, Facebook, Amazon and other digital giants will be taxed as from 2019

Bruno Le Maire has announced that GAFA will be subject to taxation in France as from 1 January 2019. There is still the priority of adopting a tax on leading tech companies at European level.

It is simply a question of fair taxation: from 2019 onwards, top Internet companies that generate profits in France will be taxed on their turnover. The measure was announced on Monday 17 December 2018 by the Minister of Economy and Finance, Bruno Le Maire, during a press conference. He estimates that the tax should generate around 500 million euros in fiscal revenue in 2019.

Although it is yet to be decided exactly how the tax will be applied, the Minister stated that it would be at a rate of around 3% on advertising revenue, online marketplaces and GAFA resale of personal data.

The tax would therefore go further than the European directive concluded with Germany at the beginning of December, which only aims to tax turnover generated by digital companies’ advertising revenue, and which should eventually be adopted by all European Union Member States.

“We are fully determined to obtain a unanimous European decision before March 2019”, the Minister asserted in this regard. “We are going to take steps along with my German counterpart to convince the few States still opposed to European-level taxation of tech companies”.

Integrating the GAFA tax into the PACTE law

According to the Minister, the measure “could be incorporated into the PACTE law”, the text of which was favourably voted on at first reading by the National Assembly on 9 October and will be submitted to the Senate in January 2019.

The Plan d'Action pour la Croissance et la Transformation des Entreprises (PACTE – Action Plan for Business Growth and Transformation) seeks to dynamise French companies’ growth. Its main focuses include simplification of entrepreneurial procedures, easing of companies’ tax and social security payment thresholds, and incentives for employees to share in companies’ economic results.

Why tax GAFA?

The acronym “GAFA” designates the major tech companies whose activities cover the entire planet: the Internet’s “Big Four” (Google, Apple, Facebook and Amazon), of course, along with other more recent companies such as Uber and Airbnb.

The paradox is that these companies’ head offices are all too often not located in countries where they generate revenue. In Europe, for example, Google, Apple and Facebook have located their head offices in the Irish Republic. Result: these companies are mainly subject to taxation by the States in which their head offices are located, whose tax systems are often highly advantageous.

In 2017, the French branch of Facebook declared turnover in France as 55.9 million euros and paid 1.9 million euros in corporate tax. A sum well below the reality of advertising revenues generated by the Group in France.

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