France introduces Amazon tax despite Trump threats, United Kingdom to follow

French digital service tax target US companies unfairly says administration

In a joint statement, Republican Chuck Grassley of Iowa, committee chairman, and Democrat Ron Wyden of OR said: "The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost U.S.jobs and harm American workers".

"I believe profoundly that between allies, we should and we can settle our differences by other means than threats", he added.

The Group of 20 has tasked the Organization for Economic Cooperation and Development with finding a fix in the global tax system that has allowed some internet heavyweights to take advantage of low-tax jurisdictions in places like Ireland and pay next to nothing in other countries where they make huge profits. France forecasts that the tax could bring in as much as €500m a year. In October 2018 the United Kingdom government's 2018 Budget included a proposed "Digital Services Tax" which would be 'a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models' - primarily as a means of closing a loophole which has seen companies like Google dodge billions in tax.

And earlier this year, Google won its legal case against a French tax demand of €1.1 billion (S$1.7 billion) for advertising revenue generated in France by successfully persuading judges that its practice of registering profits in Ireland exempted it from French liabilities. This causes problems for countries such as France and the United Kingdom, where huge sales are made but governments see very little of this money returned in tax.

Online retail giants have tried to minimise criticism by transferring a share of their business to their big European markets and by arguing that they are hiring lots of people in Europe to handle their operations. Facebook, Amazon and Google owner Alphabet are all in the firing line. Such companies will have to pay a tax of 3 %, earning the French treasury an estimated 400 million euros this year alone.


Some experts said the costs of compliance could add up for tech firms, especially if more European Union countries push through their own national taxes. It is due to kick in retroactively from the start of 2019.

Once an appropriate global solution has been found, the United Kingdom would drop its own tax, the government added.

Paris-based tax lawyer Jessie Denton told BBC that this tax is more of a "symbol" than an effective tax measure, as it raises a relatively small sum of money.

A trade dispute therefore looms. The French levy is 3 per cent, but the British plan to levy only 2 per cent tax, and the Germans have been noticeably silent altogether.

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