By Eurasia Business News – November 27, 2020

France will tax the digital giants in 2020, confirmed on Wednesday the French Ministry of the Economy, despite the threats of US retaliation on $ 1.3 billion in French products, including handbags and cosmetics.

The French tax on digital services better known as the “ GAFA tax ” has brought in € 350 million in 2019 – Photo credit : Pexels

Paris confirmed that the tax on digital giants, mainly the GAFA, will be levied in 2020, announced on November 25, the French Ministry of the Economy. France maintains its position despite the threats of US retaliation on $ 1.3 billion in French products, including handbags and cosmetics.

In doing so, France is exposed to sanctions from the United States, which is in full transition between President-elect Joe Biden and his predecessor Donald Trump. The latter had already raised the customs duties on French wines to 25% in the context of the conflict over state aid paid to Airbus and Boeing.

In July 2019, the French Parliament adopted a bill on a 3% tax on the gross turnover of digital giants generated from providing “in France,” within the meaning of the law, two categories of digital services— “digital interface” services and “targeted advertising” services. President Emmanuel Macron signed the bill into law on July 24.

The 3% tax applies only to companies that generate, from providing the taxable services, € 750 million globally and € 25 million in France.

The measure has made France a pioneer country in the taxation of “GAFA” (acronym designating Google, Amazon, Facebook and Apple) and other multinationals.

Starting to effect from January 1st, 2019, the French 3% tax brought in 350 million euros in 2019 before a truce.

France advocates this tax, claiming that the digital service companies are not paying their fair share of taxes because their overall tax rates are much lower than those of other companies.

Global Tax Negotiations Fail 

Washington, which considers this tax as discriminatory against US digital companies and infringing trade agreements, had retaliated by threatening to apply tariffs of 100% on certain French products, in particular cheeses, cosmetics and handbags.

In January 2020, the two allies had concluded a truce to give their chance to the negotiations conducted under the framework of the OECD to create a global tax on tech multinationals. Paris froze the levy of its tax and Washington abstained from sanctions.

These negotiations failed last October, however, rendering the truce void.

“We had suspended the collection of the tax until the OECD negotiations were concluded. This negotiation failed, so we will collect a tax on the digital giants next December“, warned in mid-October the French Minister of the Economy, Bruno Le Maire.

Beginning in 2013, the OECD and G20 countries conducted negotiations aimed at addressing issues arising from domestic tax base erosion and profit shifting (BEPS), by which multinational enterprises exploited mismatches between countries’ tax systems to minimize their taxes.

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