France preparing to levy “GAFA tax” for 2020

French Ministry for the Economy and Finance confirmed on Wednesday that tax notices have been sent to digital giants in the country asking them to pay the three-percent tax for its 2020 turnover, a move exposing Paris to Washington’s punitive tariffs, French daily Les Echos reported.

“In its first crop for 2019, the tax brought in 350 million euros. At the start of this year, Bercy (Ministry for the Economy and Finance) was aiming for some 600 million euros in 2021 and beyond. The amount that will be collected for 2020 is not known,” Les Echos reported.

The economic daily added that the French government was under pressure to collect exceptional contribution as it had pledged huge spending to face the economic fallout of the coronavirus crisis.

The French authorities did not reveal which companies have been notified to pay the digital tax in 2020. According to an assessment by Taj, one of the leading French law firms, 27 companies would be subject to the digital turnover tax, including a majority of American firms as well as a few German, French and Dutch companies.

France adopted a digital services tax bill in July 2019, imposing a three-percent levy on digital turnover for companies whose worldwide annual sales on the web exceed 750 million euros and sales in France amount to at least 25 million euros.

Considering that the tax “unfairly targets at certain U.S.-based technology companies” including GAFA — Google, Amazon, Facebook and Apple — Washington threatened to impose tariffs of up to 100 percent on 2.4 billion U.S. dollars’ worth of French goods in retaliation.

But it agreed to delay the imposition of tariffs as talks were underway at the Organization for Economic Co-operation and Development (OECD), which should reach an accord by the end of 2020.

Earlier in June, the U.S. pulled out of the OECD talks and warned European nations of retaliatory measures if they press ahead with their new taxes on American tech giants.

French Minister of Economy and Finance Bruno Le Maire replied that “France will give no ground on digital tax.”

In October, the OECD announced that the talks on digital tax “have been slowed by both the COVID-19 pandemic and political differences” and negotiators agreed to keep working towards an agreement on global digital tax by mid-2021. (1 euro = 1.19 U.S. dollars)