At the end of November, France sent its first tax returns to the digital giants. As a reminder, this new tax applies to companies with a turnover of at least 25 million euros in France and a turnover of 750 million euros worldwide. At the same time, other European countries, including Italy and the UK, are preparing to levy a tax in the coming months. Here’s the first major economic challenge that Joe Biden can look forward to on January 20, 2021.
The first digital taxes are arriving
In response to France’s imposition of digital giants, the Trump administration threatened to tax certain French products. In the sights of the US government: cosmetics and French handbags. A total of 1.3 billion additional customs duties could be imposed on France. Washington states that such tariffs could be levied on 10 other countries on different products, including the UK, Italy, India or Spain.
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The problem behind this whole story is finding the right formula to tax the digital economy. Tech companies can of course sell their products “cross-border” and thus escape the taxes of many countries. This parade prevents the countries where these services are used from collecting a tax. A topic on which the 137 member countries of the OECD tried to reach an agreement in early autumn 2020. Unfortunately, the Covid-19 crisis has distracted the priorities of the countries present and the absence of the United States sowed doubts during this meeting.
Will Joe Biden take the same line as Trump?
This did not prevent Bruno Le Maire from going alone and sending out his first tax returns. The French economy minister hopes to make all of these changes. Today the rule is as follows: The companies concerned must achieve a turnover of more than 750 million euros worldwide and a turnover of 25 million euros in France and operate a market, just like Amazon, Uber, or Airbnb or be viewed as an “advertising agency” , this is the case with Google, Facebook or Criteo. The latter have to pay the equivalent of 3% of their French income in taxes.
In the United States, the Democrats have consistently supported the Trump administration’s approach to this matter. Still, the new government declined to take a stand or comment. As the Wall Street Journal reminds us, this hot topic is sure to be one of the first challenges facing US President-elect Joe Biden. Apparently, Amazon and Facebook have declared that they disagree with the digital tax and support the OECD discussions.
The discussions drag on, however, and not everyone likes it. Some countries, including India and Austria, have also started to levy their own taxes on the digital revenues of large companies. Spain also announced that its digital services tax will come into effect on January 16 with quarterly payments.