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France will introduce a new tax aimed at major technology companies, including Apple, Google, Amazon, and Facebook, with the digital tax attempting to extract funds from the tech giants while other efforts to reform European tax law are underway.
Arriving on January 1, the French government's "GAFA" tax," named after the four tech companies it is targeting, imposes the tax on digital revenues from large companies. The tax is being introduced to combat attempts by the firms to avoid paying what is considered a fair share" of taxes in the country, by taking advantage of European tax laws.
French finance minister Bruno Le Maire advised on Monday he expects the levy to bring in an estimated 500 million euro ($570 million) for 2019, reports The Local Fr. It is unclear exactly what the tax will cover, nor how much each company can be expected to pay, but it is highly likely Apple will be compelled to pay millions of euros to the government.
Major tech companies have come under fire for shifting funds around the European union to minimize their tax outlay, and in some cases funneling revenue through operations in countries with extremely low tax rates or other arrangements. The taxes have led to criticism from various organizations, and in the case of Apple in France, led to protests in Apple Stores over the use of loopholes.
A 2016 ruling by the European Commission declared Ireland had to collect billions in back taxes from Apple, after being found to have extended preferential tax treatment to the company. Apple has since paid the entire 13.1 billion euro ($15.3 billion) balance, as well as 1.2 billion euro in interest, into an escrow account controlled by the Irish government.
Both Apple and the Irish government have appealed the ruling.
The European Commission has previously announced proposals to force digital media companies to pay taxes in the European Union based on where the revenue is generated, rather than the country of their European headquarters, as a way to close the loopholes. In theory, this would make the tech firms pay each country's specific tax rates, at a level relative to the income.
Despite seemingly high support, including from Germany, the plan has yet to become a reality. There may be a prolonged wait before any major reform passes through, as such measures would need to be agreed by all member states before becoming law.
The BBC reports the European Commission also mulled over the idea of charging a 3 percent tax on revenues of large Internet companies with global revenues in excess of 750 million euro ($850 million) per year, and an EU-taxable revenue of at least 50 million euro ($56 million).
In the meantime, some governments are looking into ways to apply taxes on digital goods.
In October, plans were announced by the United Kingdom to introduce similar "Digital Service Tax" of 2 percent on revenues from UK-based users, a tax that could be applied by April 2020. At its introduction, UK chancellor Philip Hammond stressed it would be a temporary measure until "an appropriate long-term solution is in place."