A newly unveiled French tax proposal targets American internet companies like Amazon, a company notorious for paying zero federal taxes in the United States on multibillion-dollar annual profits.
The French proposal promises to end tax avoidance at a time when Silicon Valley’s tax practices and tax avoidance schemes are coming under a close microscope around the world. The issue is particularly poignant in France, where “yellow vest” protests have long demanded fairer taxation.
The French bill offers a stark contrast to the tech industry’s reality in the United States. Amazon paid zero federal taxes on its $16 billion in 2018 profits, according to a recent analysis by the Institute for Taxation and Economic Policy. The company, which regularly trades places with others from Silicon Valley to be among the most valuable corporations on Earth, also paid a negative federal tax rate in 2017, according to the ITEP.
Amazon did not respond to a request for comment.
The French proposal, which targets 30 total firms, is another test of Silicon Valley’s considerable power in Europe where they spend millions of Euros every year to open doors and influence the continent’s lawmakers. Last year, a European Union-wide proposal to tax tech giants failed due to opposition around the continent despite support from France.
“Taxing digital giants is a matter of fiscal justice,” French Finance Minister Bruno Le Maire tweeted.
Taxer les géants du numérique est une question de justice fiscale. Un projet de loi sera présenté mercredi. Retrouvez le projet détaillé du gouvernement et mon interview dans @le_Parisien ➡️ https://t.co/zjtE1nYDWF pic.twitter.com/vDebhE9eD9
— Bruno Le Maire (@BrunoLeMaire) March 3, 2019
Securing beneficial tax deals in the U.S. is one of Amazon’s most high-profile and contentious practices. In January, Amazon abandoned plans to build a “headquarters” in New York City after sharp criticism for secret deal-making and billions in state and city tax breaks. Last week, the company abandoned plans for a Seattle development after opposing a “head tax” on big businesses to support homelessness services and affordable housing.
The call from Europe to tax tech giants is hardly limited to politicians, activists, or workers. Competitors are, of course, pushing for a change as well.
Alexandre Bompard, the CEO of the French multinational retailer Carrefour, recently called for an end to the taxation imbalance between internet firms from countries like the United States or China and the greater tax burden on his own brick-and-mortar business.
“They pour their products onto markets without even paying value-added tax, and hardly any other tax at all, it is intolerable,” Bompard said in an interview with Journal du Dimanche. “On the same turnover, they should pay the same tax.”
Le Maire’s proposal would charge 3 per cent on French revenue and could yield over 500 million Euros, he told Le Parisien newspaper on Sunday. The bill will be presented to the French cabinet on Wednesday and then to the French parliament.
The tax, which targets firms with 750 million Euro in global revenue and 25 million Euro in French revenue, would hit U.S. giants first and foremost including Google, Facebook, Amazon, Airbnb, and Apple. There are also French, Chinese, and other European firms that fall under the bill’s purview.
Internet companies pay around 8 per cent tax on profits, according to the European Commission, while other companies pay around 23 per cent. Some tech firms pay little or no taxes at all in Europe, a mirror of the American situation.
It’s been only one day since Le Maire’s proposal was made public, but the immediate response from Silicon Valley in many ways follows the accepted public script when faced with potential new taxes.
“We follow the rules and pay all the tax we owe in the places we do businesses. That is true as rules apply today and will remain true for whatever rules apply in future,” Airbnb spokesperson Aurélien Perol told Gizmodo. Perol tried to stress that Airbnb’s business model differed greatly from the other companies that “take large sums of money out of the places they do business.”
The real test comes first behind closed doors and then in public in French parliament later this year.