France is moving toward passage of the first digital tax bill that tech giants would pay this year, with the National Assembly approving the measure late April 9 and sending it to the Senate for consideration in May.
The lawmakers voted 88-7 for the bill, which also includes a provision that would postpone a planned reduction in corporate taxes. It will now be considered by France’s upper house, the Senate, in a public session starting May 21.
A spokesperson for the Senate committee for economic affairs said it expects the bill will pass before the end of May.
The bill would target large companies with 750 million euros ($845 million) in worldwide revenue. The proposal would tax revenue from digital activities like targeted online advertising and from “intermediary” platforms that connect buyers and sellers online.
More than two dozen companies will meet the financial targets to be hit with the tax, which will raise an estimated 500 million euros a year, according to finance and economy minister Bruno Le Maire. Companies would make their first tax payment in October.
The bill would also postpone a corporate tax reduction for companies that have more than 250 million euros in sales. Le Maire said the move, which is forecast to raise 1.7 billion euros in additional revenue, would help cover the costs of a hike in government spending, triggered by demands from yellow vest protesters who opposed fuel tax increases.
Digital Investments Continue
France’s digital tax effort has drawn the ire of U.S. officials, such as Secretary of State Mike Pompeo, who maintains it “would negatively impact large U.S. technology firms and the French citizens who use them.”
But the tax hasn’t stopped U.S. companies from boosting their commitments to France. Salesforce.com is set to invest $2.2 billion in its French business over the next five years. Facebook and Google will add to their artificial intelligence teams in Paris. SAP of Germany said it will invest more than $2 billion in research and development in France. And Accenture said April 8 that it was acquiring French cloud technology company Cirruseo.
In addition, the French government has announced more than $1.5 billion in AI research spending through 2022, as well as up to $5 billion in tax credits tied to research. In 2018, funding for French tech companies grew 8 percent to a record $3.5 billion, according to CBInsights.
Jessie Gaston, a Paris-based Dentons tax partner, said the government seems to be betting on getting four or five years to collect the tax, by which point the Organization for Economic Cooperation and Development will have reached consensus on corporate taxation in the digital age.
“They know the tax is quite fragile, but they are betting on time,” she said.
Le Maire has promised that the government will withdraw the unilateral French tax as soon as either the OECD or the European Union create a multilateral one.
“I can tell you that your voices will weigh heavily when France goes to negotiate digital taxation in the OECD. If we get a result, it will also be thanks to you,” Le Maire said after the vote.
—With assistance from Pimm Fox (Bloomberg).
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