U.S. to hold hearing on French tax examination August 19

Cheryl Sanders
July 14, 2019

Also on Thursday, Britain moved ahead with similar plans as the government published draft legislation for a "digital services tax". This causes problems for countries such as France and the United Kingdom, where huge sales are made but governments see very little of this money returned in tax.

An activist wearing a mask depicting Facebook chief executive Mark Zuckerberg in Belgium a year ago. In October 2018 the United Kingdom government's 2018 Budget included a proposed "Digital Services Tax" which would be 'a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models' - primarily as a means of closing a loophole which has seen companies like Google dodge billions in tax.

Some experts fear France's unilateral approach with the digital tax will backfire, ultimately harming consumers and smaller businesses it aims to protect. The government projects that the tax will add £275 million to the public coffers in the coming financial year, providing it is enacted as planned in the 2020 Budget, rising to £440 million by 2023.

Online retail giants have tried to minimise criticism by transferring a share of their business to their big European markets and by arguing that they are hiring lots of people in Europe to handle their operations. One of the early demands of the so-called Yellow Vest protesters in France, who shook the country's domestic politics, was to tame online retailers.

Many global tech companies pay taxes in the countries where their headquarters are based, rather than where they generate sales.

France passed a polarizing tax on "digital services" that will hit American tech's major players like Google, Facebook, and Amazon. "We have got to find a way of taxing the Internet giants", he said.

They argued that America's argument that the companies, also including Apple, are already being taxed at their headquarters in the USA and should not be subjected to another tax. The French government said that this is a temporary measure that will be applied until the European Union and wider world can reach an agreement on how to tax major tech companies more effectively.

The final vote in favor of the tax in the French Senate came hours after the Trump administration announced an investigation into the tax under the provision used past year to probe China's technology policies, which led to tariffs on $250 billion worth of Chinese imports.

A trade dispute therefore looms.

And the Internet giants will still be able to shop around for the most favourable tax regime. Chinese, German, Spanish and British firms will be affected by the tax too.

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