France is going after digital giants’ money

by Sophie Pairault in Paris

The French president, Emmanuel Macron, is leading the effort to impose “fair” taxes on digital giants like Facebook and Google in Europe.

France, Germany, Spain and Italy have agreed this week that digital companies should be taxed on revenues generated in a specific European country and not on profit anymore, to avoid tax optimisation and to force digital multinationals to pay a fair share of taxes in Europe.

For example Airbnb paid less than €100k in taxes in France last year for an estimated €130M revenue. France is the second largest market for Airbnb.

A few additional European countries are supporting the initiative. The goal is clearly to move quickly, even if it means applying a temporary solution before reaching an agreement with the 27 members where some countries like Ireland are likely to push back. Ireland is currently battling a European Commission’s decision that Apple owes Ireland €13 billion in back taxes.

How this can be achieved legally is still unclear, but pressure is mounting from many sides for companies like Google, Facebook, Apple, and others.

The French initiative isn’t the only one trying to tackle these tax issues for digital companies. The OECD wants to reduce tax loopholes used by global corporations, and the European Commission is also working on changing the law but is likely to move slowly, as it requires an agreement from all members of the European Union. Interestingly, the president of the European Commission suggested last week that key tax measures should in future be voted with a qualified majority and therefore not require the agreement of the 27 countries.

An important component will also be European public opinion, as many citizens indicate they feel cheated by companies they love and use widely, but which are seen to be avoiding paying taxes to countries that contribute to their commercial success.

This is going to be an interesting test for the European Union that wants to demonstrate strength and agility after the multiple crises and division of the past few years that led in part to Brexit.