France faces legal threats over digital tax
France's decision to press ahead with a 3pc tax on digital revenues may open the door to a host of legal challenges by companies, and an investigation by the US into potential unfair trade policies.
The tax was approved by the French parliament on Thursday. Ireland is among the countries that blocked a European Union wide tax, before France pressed ahead on its own. The tax will hit about 30 companies, including major Irish employers Apple, Facebook and Google. It could also lower the tax take here from companies affected.
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Challenges on the grounds that the tax violates French or EU law, or bilateral tax treaties, might result in the levy being stalled or overturned, although that could take years.
Expect a lot of legal challenges, said Giuseppe de Martino, president of the French tech industry group ASIC.
"It's a taxation on revenues (and not on profits), encouraging companies to reduce their level of investments and innovation," he said.
Tech companies fear they will face a complicated patchwork of unilateral digital tax measures, as more than half a dozen countries consider similar proposals. France's move, due later this year, would impose the tax on companies that have more than €750m in worldwide sales, including more than €25m in France, from certain digital activities.
Countries such as the Czech Republic and Austria are considering their own versions.
Tech giants face payments in the tens of millions under the measure. France forecasts that the tax could bring in as much as €500m a year.
The US government says it will conduct a so-called Section 301 investigation into the French tax.
That could mean tit-for-tat tariffs on French wine or other imports.
Additional reporting Bloomberg