The problem with France’s plan to tax big tech
France recently approved the 3% revenue tax for big technological companies. The move would significantly affect Alphabet, eBay, Facebook and many others, irked the U.S. government, who is now investigating the move as an unfair trade practice.
It is no secret that the European Union has wanted to levy such a tax for years, however, has not been able to do so due to opposition from Ireland, the Netherlands and Bermuda—low-tax countries who benefit from tech companies setting up their bases there in order to avoid taxes.
“We’re being confronted with the emergence of economic giants that are monopolistic and that not only want to control the maximum amount of data, but also escape fair taxes. It’s a question of justice.”Bruno Le Maire, France’s finance minister
The biggest hurdle to tax digital companies is the grey areas of revenue. Due to the platforms’ digital nature, it is difficult to know exactly where the revenues were earned.
For example, if a company based in the UAE, such as Emirates, advertises its services via Facebook to people located in France—including citizens, residents and tourists as it cannot differentiate between them—to which country should Facebook pay taxes to?
This crossover can even allow digital firms to use the loopholes and arguments to evade taxes. Luckily, there are companies such as OECD that are looking into ways to tax them.
Even if the potential of such tax could move billions of dollars into the local economy, it opens up loopholes that digital companies can jump through when the tax is levied by just one or even a few countries.
However, without taxing these big tech companies, countries are losing an increasing share of potential revenue as the world becomes more digitised.
The answer needs to come from everyone. The sheer global nature of these digital giants needs a global solution, with almost every country on board. If the World Bank, United Nations or a new coalition of governments is formed who can impose a tax on the total revenue of big tech from all countries, and then redistribute or inject that amount into various economies, that would be a solution worth implementing.
