Week in Insights: France Taxes Tunes on Its Own and Pays a Price

Curated by Daniel Xu

In response to a new streaming tax designed to support the local music industry, Spotify has announced a subscription price hike for French users. The move comes amid other “disinvestments” by the music streaming service in France more generally.

The price increase aims to offset the 1.2% tax on streaming revenue generated in the country and reflects the perils of unilateral state action in the global marketplace. When countries seek to support their domestic markets or cultural sectors through taxation, global companies can simply adjust their operations by hiking prices or even curtailing access for consumers.

France’s unilateral move, though well-intentioned, illustrates the necessity for international cooperation in formulating tax policies that recognize the borderless nature of digital services. Uncoordinated approaches risk a fragmented marketplace, where service access and costs are subject to local tax policies rather than consumer choice.

If Spotify exits the French marketplace, it would result in a complete absence of these potential subsidies for the local music scene. Corporations can be compelled to contribute fairly to the cultural sectors they profit from through a coordinated, cross-border approach to digital service tax policy—but it is a challenge when one country acts alone. A global or even EU-wide streaming tax would ensure Spotify would see no benefit in pulling its business from France.

If we want to keep rocking out to our favorite tunes without paying exorbitant fees or saying au revoir to streaming platforms, the solution lies in international cooperation.

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Spotify’s logo on a smartphone

Photographer: Tiffany Hagler-Geard/Bloomberg via Getty Images

State Insights

Eversheds Sutherland’s Timothy Gustafson and Baird Fogel explain the complicated tax issues college athletes face when they sign lucrative name, image, and likeness deals.

Stinson’s Marc Weintraub and Zachary Taylor say the March 1 ruling that the Corporate Transparency Act is unconstitutional could affect states considering their own version of the federal law.

Alston & Bird’s Michael Giovannini and Josh Labat say startups should be aware of state nexus, gross receipts taxes, and unclaimed property obligations while they look to grow.

Emory Law School’s Michael Broyde explains how direct aid would benefit private education more than traditional tuition tax credits would.

Federal Insights

Mark Everson, former IRS commissioner and vice chairman of Alliantgroup, says the agency must be transparent about technology and data security with taxpayers to function more effectively.

Ellen McElroy and Kristen Martin of Eversheds Sutherland analyze how taxpayers should navigate employee retention credit claims as the deadline for the IRS voluntary disclosure program approaches.

BDO’s Rosy Lor says taxpayers must work closely with their advisers to identify arrangements that could be treated as foreign trusts, and the related reporting obligations.

Vernon Noronha and Felicita Moreno-Stevens of Moss Adams explain how an eight-year battle between a medical device maker and the IRS highlights transfer pricing methodology challenges.

Crowe’s A.J. Schiavone, Sophia Shah, and Andrew Eisinger say tax pros should consider software development, contractual research, and other transactions when calculating R&D expenses for tax credits.

SMB Law Group’s Eli Albrecht shares how he made drastic changes to escape burnout, leave behind the work-life balance paradigm, and integrate his family and work life.

Global Insights

Freshfields’ Philipp Redeker and Viktoria von Abel examine how multinationals operating in Germany can prepare for how transfer pricing adjustments may affect minimum tax calculations.

Columnist Corner

The Tax Cuts and Jobs Act’s overall failure to boost investment, job creation, and economic growth should spur Congress to implement a global minimum tax, Andrew Leahey writes in his Technically Speaking column. Ad-hoc initiatives against tax loopholes and avoidance strategies are comparable to “repairing a leaking roof by waterproofing the ceiling,” Leahey says, concluding that a global minimum tax would be a more permanent solution that advances equity.

Career Moves

J. Dean Hinderliter has joined Bracewell as a tax partner in the Dallas office.

Julie Marion has joined Sheppard Mullin as a partner on the energy, infrastructure, and project finance team and the tax, employee benefits, and trusts and estates practice group in Chicago.

Steven Lorch has joined Weil Gotshal as a partner in the tax department in New York.

Jacob Lager has joined Coblentz Patch Duffy & Bass as a partner in the tax practice in San Francisco.

If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team (login required).

• President Joe Biden proposed $12.3 billion in annual funding for the IRS in his budget—supporting the agency’s momentum as it builds up its enforcement efforts on wealthy individuals and companies that aren’t paying what they owe.
• The battle over an upcoming referendum on Chicago Mayor Brandon Johnson’s proposed “mansion tax” could be decided by the Illinois Supreme Court after business interests asked the high court to hear the case.
• The free, IRS-run tax filing tool that launched to the wider public is expected to be used by about 100,000 taxpayers this filing season, Treasury Deputy Secretary Wally Adeyemo said.
• Crypto tax cheats just might have more to worry about this filing season as a newly confident IRS worked with the Department of Justice on the first standalone criminal charges for crypto tax fraud.

The skyline of Chicago, on Jan. 17, 2024.

Photographer: Win McNamee/Getty Images

Tax Journals

(Bloomberg Tax login required)

Tax Management International Journal

It isn’t clear how Section 267A of the tax code applies in a Pillar Two world, and Treasury and the IRS may want to think twice about incorporating Pillar Two into Section 267A, Baker McKenzie’s Ethan Kroll, John Barlow, and Young-Eun Choi say.

The recent OECD report on Amount B of Pillar One doesn’t yet provide the certainty companies and countries seek for approaching the transfer pricing of baseline wholesale marketing and distribution activities, Grant Thornton’s Steven Wrappe and Kirsty Rockall say.

Tax Management Memorandum

The New York Supreme Court’s recent withdrawal of its 2023 order concerning certificate cancellations and dissolutions of entities controlled by Donald Trump removes a potential tax uncertainty for him, Gunster’s Alan Lederman says.

Our Team

We talk about tax a lot. But you would hear much more if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.

Watching
Daniel Xu (Content Editor): A fitness competition reality show called “Physical: 100.” The second season will start airing in a couple of days, but given how many of the first season’s episodes ended with a cliffhanger, I’ll probably hold off on watching it.

Reading
Andrew Leahey (Columnist): I’m engrossed in Mary T. Hufford’s “Chaseworld: Foxhunting and Storytelling in New Jersey’s Pine Barrens,” a fascinating exploration of the rich culture surrounding fox hunting.

Listening
Jada Chin (Content Editor): “Dear Alana,” a podcast about the disappearance of 24-year-old Alana Chen. It explores her life through the journals she left behind, which document her struggle with her LGBTQ+ identity and complicated relationship with her faith.

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