Uber Inc., Airbnb Inc., Alphabet Inc.'s Google, and Facebook Inc. are among the global tech giants awaiting final details of France’s digital tax levy, set to be revealed March 6.
The country has taken the lead in the race to enact Europe’s first digital services tax, as its council of ministers prepares to discuss and publish long-awaited details of how the levy will work.
The country has effectively leapfrogged the U.K., Belgium, Austria, Spain, and Italy, all of which are undertaking unilateral measures to tax the digital economy.
In a March 3 interview with French newspaper Le Parisien, the country’s Finance Minister Bruno Le Maire said the tax would be levied at 3 percent on the revenue generated by certain digital-based business models in France and would be effective from 1 Jan. 2019.
In earlier interview Jan. 20 Le Maire indicated that the levy could be as high as 5 percent on a tiered basis, based on the amount of revenue the company generated.
“The details that have been released so far indicate that the government is taxing three types of digital business models, that is advertising, the resale of data and digital intermediaries like Uber and AirBnB,” said Sandra Hazan, partner and co-head of European tax at Dentons law firm in Paris.
Companies affected will have annual digital revenue of 750 million euros ($849 million) globally and 25 million euros in France. France estimates the tax will bring in 500 million euros of revenue a year, according to Le Maire.
In the Le Parisien article, Le Maire also indicated that the tax could affect around 30 companies, most of them American.
The country decided to push ahead with a unilateral tax on digital giants in December 2018, after talks of an EU-wide digital tax stalled the same month.
However, it isn’t the only European country preparing its own digital tax.
Spain’s proposed 3 percent tax on digital companies that generate 750 million euros globally and 3 million euros in Spain was announced last year.
The government estimated the tax would bring in as much as 1.2 billion euros annually, a figure that the EU disputed.
Legislative plans hit a snag last month when the country’s coalition government failed to pass its budget, leading to the prime minister calling for a snap election, scheduled for April.
The election means that all proposed tax laws, as well as the digital tax plans awaiting parliamentary approval, will be dissolved along with the government. The new government can, however, re-introduce the bill.
The U.K. has published the most detail of any digital tax proposal yet and took public feedback on its plans up to Feb. 28.
The country’s finance ministry expects the law will be added to the Finance Bill 2019, and take effect from January 2020.
Chancellor Philip Hammond said in a budget speech inOctober that the U.K. would “go it alone” if talks for an EU-wide digital tax continued to stall.
The U.K. proposes a 2 percent tax on certain businesses that have 500 million pounds ($659 million) of digital revenue globally and 25 million pounds of digital revenue in the U.K.
Companies can deduct the U.K.'s tax from their corporate income tax in the U.K. but they won’t be awarded tax credits.
Belgium is the latest EU country to publish a draft digital service tax.
A draft proposal was submitted Jan. 17 to the finance ministry for approval. The country aims to introduce a provisional 3 percent tax on revenue from activities such as the selling of user data by companies that have annual worldwide revenue of 750 million euros and European Union revenue of 50 million euros.
Pioneering Italy proposed a domestic digital tax as long ago as 2017.
Its parliament finally approved its tax in the Italian 2018 Budget Law. But the ministry of finance will need to issue an implementation decree, which tax advisers expect will be published April 30. The tax will take effect 60 days later.
Unlike the EU’s proposed tax, Italy’s 3 percent web tax hits the buyers of the service rather than the sellers.
Any businesses that make more 3,000 business-to-business digital transactions in Italy during a calendar year would be liable for the tax. Companies can’t use the tax to offset Italian income tax.
Elsewhere, Austria and Germany have focused their efforts on taxing online advertising.
The Austrian Chancellery proposed a 3 percent tax Jan. 10 that would be paid by sellers of online advertisements, like Facebook and Google.
The tax would be levied on any company with 750 million euros in worldwide revenue and 10 million euros in online advertising revenue in Austria.
The German government indicated in a private tax ruling that it will charge a withholding tax on royalties for online advertisement spending that Germany-based companies pay to foreign providers.
The move is likely to be challenged, as it could mean many German businesses would have to pay significant backdated withholding tax for their online advertising spending of the past three years.
Germany meanwhile continues to work with France to push for an EU-wide tax on online advertising.
“I can only say that we are working very closely with our French partners and that we want to make progress on the issue,” said German finance ministry spokesman Dennis Kolberg.
All the digital taxes proposed by EU nations are temporary measures, while the countries wait for a global solution currently being negotiated at the Organization for Economic Cooperation and Development.
—With assistance from Helene Fouquet (Bloomberg News) and Birgit Jennen (Bloomberg News).