For several years now, European governments have criticized American companies like Google, Apple, Facebook, and Amazon - referred to by the acronym GAFA - for paying very little corporate taxes despite making global profits. In fact, according to the Coalition for a Prosperous America (CPA), in 2019, 500 American public businesses paid only an 8.7% average federal tax rate on their profits. However, if these companies paid full taxes, the US Treasury could have yielded an additional $97.8 billion.
Because these multinational corporations are taxed less than twice the amount that traditional companies pay in Europe, France and other member countries of the European Union (EU) are calling for more tax justice. To minimize the taxes they pay in France and Europe, these companies use a well-known legal process: tax optimization. They take advantage of the disparities in the European tax system and transfer their activities to countries where taxation is more welcoming. It also does not help that EU member states are currently struggling to agree on a common tax, with France taking the lead and adopting its own tax on digital services.
The French tax, which is based on the initial European proposal, provides an overview of the future tax that could be created for Europe. This tax will apply to two types of digital services: online digital intermediation services such as marketplaces and platforms and targeted online advertising, which includes the sale of user data. This will be applicable for relationships between businesses (B2B), between businesses and consumers (B2C), and between consumers (C2C).
Discussions are still ongoing, with France resuming collection of “digital taxes” on some of the biggest technology companies offering products and services to French buyers. Meanwhile, European experts are also remaining hopeful that the departure of former President Donald Trump will help facilitate negotiations with the US more smoothly.
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