France to forge ahead with three per cent tax on internet and technology giants

France targets 30 internet and technology companies with tax intended to raise €750m annually from 2022

France is to impose a three per cent ‘digital tax' on internet giants that have global revenues of more than €750 million and French revenues of more than €25 million.

The tax will be imposed purely on digital transactions, covering locally targetted advertising, data sales and marketplace fees.

That would mean that Amazon, for example, would not be taxed on physical sales, but would be taxed on income generated by its platform that enables third-parties to sell goods via its website. Apple, meanwhile, would face extra taxes on sales via iTunes and its App Store, but not on Mac or iPhone hardware.

Facebook and Google, meanwhile, would have to pay the tax on advertising sales - the mainstay of their revenues.

Critics of such taxes have suggested that they are designed to target US internet giants, and that the sums raised may be outweighed by high compliance costs.

We must fight against the distortions that these giants have created

At a press conference in Paris to unveil the plans, finance minister Bruno Le Maire claimed that the tax would apply to about 30 companies, including Amazon, Google and Facebook. The tax will be backdated to 1 January, and could raise as much as €450 million in its first year, rising to €650 million annually by 2022.

Le Maire described the tax as "simple, targeted and efficient". He added that it represents an interim measure until the European Union and OECD reach an agreement on a digital tax regime that can encompass the tax practices of internet giants, booking digital revenues where the tax treatment is most advantageous, rather than where the money is actually made.

"We must fight against the distortions that these giants have created, especially on tax optimisations and on the dominant positions many have created," said Le Maire.

Finland, Denmark, Ireland and Sweden shouldn't be allowed to block 23 countries from imposing a tax

Le Maire claimed that a number of countries in the EU have blocked moves to impose new taxes on US internet giants, and added that this proves the need to shift to qualified majority voting in the EU. "Finland, Denmark, Ireland and Sweden shouldn't be allowed to block 23 countries from imposing a tax that they think is needed and just," Le Maire added.

The French digital tax proposal comes months after UK chancellor Philip Hammond introduced a similar Digital Services Tax in his October 2018 Budget that, he claimed, would raise £400 million annually from 2021, increasing to £500 million by 2024.

That proposal was attacked by US trade groups for "singling out a key global industry dominated by America companies". It was, they added, "a blatant revenue grab".