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As US tech giants react with fury, what does the G7 deal mean for France’s GAFA tax?

A trade group representing US tech giants including Google, Amazon and Facebook has reacted with fury to the G7 deal that would leave France's digital tax in place.

As US tech giants react with fury, what does the G7 deal mean for France's GAFA tax?
Tech companies make big profits in Europe. Photo: AFP

The US trade group the Computer & Communications Industry Association reacted after the French president Emmanuel Macron reached a deal with US leader Donald Trump that would leave the tax in place for the moment.

What does the trade group say?

“France's unilateral digital tax action aimed at leading American companies is unjustified, and if tolerated, will encourage other countries to follow their example,” said Ed Black, the president of CIAA, which counts Google, Amazon and Facebook among the companies it represents.

“We should not support a compromise that would green-light discriminatory taxes against US tech companies for some vague promise of possible partial reimbursement years later.”

“It is hard to imagine that the US would take no action against France's digital tax targeting US companies.

“It is unclear how US companies would benefit from permitting France to flout its trade obligations.”

Joe Kennedy, of the Information Technology & Innovation Foundation, a think tank often aligned with the industry, also said the US should reject the deal.

“If the United States gives France a pass now, then it will be open season for other foreign governments to go after major American employers and impose similar taxes,” he said.

Google had no comment on Monday's announcement but pointed to previous statements supporting a new global tax treaty while warning of “dangerous repercussions” from the French tax.


Facebook CEO Mark Zuckerberg at the Elysées Palace earlier this year. Photo: AFP

What is the tax in question?

The French parliament in July passed legislation to tax tech firms that operate in France, the levy has become known as the GAFA tax, named after Google, Amazon, Facebook and Apple.

It's a levy of three percent of revenues of tech firms which take in €750 million or more annually.

Macron had initially attempted to lead efforts to pass an international tax on digital companies, but enacted the French legislation after becoming frustrated at the slow pace of negotiations on a new global accord that would allocate more tax revenues of large international tech firms outside their home countries.

Why is it just for digital companies?

It's an attempt to address a current loophole where the big tech giants structure their business so that they pay tiny amounts of tax in countries where they make vast profits.

Under EU law, internet giants can choose to report their income in any member state, prompting them to choose low-tax nations such as Ireland, the Netherlands or Luxembourg.

Most tech giants have millions of users in France and make big money – for example Amazon recorded €25 million profit in France last year – but pay negligible amounts of tax.

The European Commission concluded that Apple had paid an effective corporate tax rate of just 0.005 percent on its European profits in 2014 – equivalent to just €50 for every €1 million.
 
Macron has described this system as “crazy” saying that it effectively gives permanent tax haven status to tech companies.
 
“The global tech players do not contribute financially to the funding of the common good, it is not sustainable,” the president told reporters ahead of the G7 summit in Biarritz.
 

The deal was announced in a joint press conference between the French and American leaders. Photo: AFP

So what happened at G7?

US president Donald Trump had been very critical of the French tax, and had threatened to impose tariffs on French wine in retaliation. However after what appeared to be an amicable meeting, he and Macron announced a compromise.

The French tax will stay in place until an international levy is decided, and if US companies end up paying more to France than they do under the yet-to-be-decided international formula, the French tax authorities will reimburse the difference.

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TECH

Google to appeal €500m French fine in copyright row

Google's legal tussle with French regulators continues.

Google to appeal €500m French fine in copyright row
Google to appeal €500m French fine in copyright row (Photo by ALAIN JOCARD / AFP)

Google on Wednesday said it is appealing a decision by France’s competition watchdog to hand it a €500m fine in a row with news outlets over the use of their content under EU copyright rules.

“We disagree with some of the legal elements, and consider the amount of the fine to be disproportionate compared to the efforts we have put in place to reach a deal and respect the new law,” Sebastien Missoffe, head of Google France, said in a statement.

The fine, issued by the French Competition Authority in July, was the biggest in the agency’s history for a failure to comply with one of its rulings.

Head of Google France, Sebastien Missoffe, has hit back against French regulators (Photo by JACQUES DEMARTHON / AFP)

The watchdog said Google had failed to negotiate “in good faith” with media companies in a long-running legal battle over the internet giant’s use of snippets of articles, photos and videos in search results.

The row has centred on claims that Google has used this content in its search results without adequate compensation, despite the seismic shift of global advertising revenues towards the search giant over the past two decades.

In April last year, the French competition authority ordered Google to negotiate “in good faith” with media groups after it refused to comply with a 2019 European Union law governing digital copyright.

The so-called “neighbouring rights” aim to ensure that news publishers are compensated when their work is shown on websites, search engines and social media platforms.

Last September, French news publishers including Agence France-Presse (AFP) filed a complaint with regulators, saying Google was refusing to move forward on paying to display content in web searches.

While Google insists it has made progress, the French regulator said the company’s behaviour “indicates a deliberate, elaborate and systematic lack of respect” for its order to negotiate in good faith.

The Competition Authority rebuked Google for failing to “have a specific discussion” with media companies about neighbouring rights during negotiations over its Google Showcase news service, which launched late last year.

Missoffe insisted Wednesday that Google “recognises neighbouring rights, and we remain committed to signing agreements in France”.

“We have extended our offers to nearly 1,200 publishers and modified aspects of our contracts,” he said, adding that the company has “shared data demanded of us in order to conform to the Competition Authority’s decision”.

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