At a recent cabinet meeting, French Finance Minister Bruno Le Maire introduced a Digital Services Tax hitting almost exclusively American tech companies. The new tax will be imposed retroactively to January 1, 2019, and will likely start a wave of digital taxation all over Europe.
This new tax poses unprecedented dangers to tax competition, tech-fostered innovation, and European and worldwide economic growth. The new levy represents a dramatic and irreversible shift for the international tax system and damages the transatlantic relationship and will likely lead to a spiral of retaliation.
The French government will apply the tax to companies that have global revenues of over 750 million Euro ($848 million), and French revenue over 25 million Euro ($28 million) and expects to bring in over 500 million Euro new revenue in 2019, going up to over 650 million Euro by 2022.
Bruno Le Maire claimed, that „this is about justice, these giants use your personal data and make a significant profit from it, without paying their fair share of tax.” A recent study by ECIPE, the European Centre for International Political Economy in Brussels shows that American digital companies actually often pay more in taxes than non-digital EU based companies.
The sole reason for the French government to impose this tax is not tax fairness, but an easy way to exploit the tech industry which is non-existent in France.
This tax will result in double taxation, less innovation, negative economic growth, add fuel to an already ongoing trade war and will lead to higher costs for French businesses and price hikes for French consumers.