France Expects More Allies In Its Tech Tax Reform Efforts

September 14, 2017 - Written By Dominik Bosnjak

France is expecting more allies will soon be joining its efforts to increase taxes on online tech giants within the European Union, according to its Finance Minister Bruno Le Maire. Companies like Google, Facebook, and Amazon have long been scrutinized by the political block over their aggressive tax avoidance techniques which are legal but still seen as high-profile examples of acting in bad faith by some politicians on the Old Continent. France has been one of the most prominent advocates of a major tax reform, with Paris already winning support from Germany, Spain, and Italy, all of whom have officially signed their proposal for such a move.

Mr. Le Maire is currently promoting a system that would mandate tech corporations with an international presence are tasked based on their revenue instead of profits. Such a regulatory framework would make numerous tax avoidance techniques like the so-called “Dutch Sandwich” completely obsolete and irrelevant as corporations would not be able to artificially reduce their profits by routing their income through EU member states with low corporate tax rates like Ireland and Luxembourg. Those techniques are currently a popular method of major tax avoidance schemes in Europe, with firms booking their profits in low-tax countries despite recording the majority of them based on sales that were made elsewhere in the bloc.

Mr. Le Maire is now expected to detail his proposed tax reform during a two-day meeting of finance ministers of EU member states which is starting tomorrow in Tallinn, Estonia. Sources said that the French official is preparing a presentation on Saturday and will be looking to win the support of additional member states by the end of the summit. The finance minister is seemingly confident that his plan will work, having stated that many more allies are bound to join the initiative in the near future, possibly even by the end of the week. During a Thursday press conference, Mr. Le Maire also reiterated that German Finance Minister Wolfgang Schaeuble is fully supportive of his plan, thus dismissing recent reports that the economically strongest member of the European Union still has some reservations in regards to increasing taxes on online tech giants operating within the political bloc.

Despite ambitious announcements, Mr. Le Maire’s plan still hasn’t been publicly detailed and it remains unclear how much additional tax it could raise if it’s completely or even just partially implemented. The actual process of enacting it could also be a complicated one, as EU member states would have to agree on a technique that would be used for calculating how much revenue tech giants recorded in each particular country and what rates should be applied in specific scenarios, of which there are many. The fact that many online corporations are selling non-physical offerings which transcend physical borders is another factor that will additionally complicate the proposed tax reform. Still, by deciding on a tax system which is based on revenue instead of profits, the EU could still be able to move forward with its implementation in a relatively quick manner due to not facing as many constraints from international tax law than it would if it decided on another profit-based alternative, Reuters claimed on Thursday, citing a source from the French Finance Ministry.

Dutch Member of the European Parliament Paul Tang is expected to publicize a detailed report on the tax avoidance schemes of online multinational companies in Europe later today, with sources claiming that his research found Facebook and Google avoided up to $6.42 billion in EU taxes from 2013 to 2015. Mr. Tang’s report is believed to be another important argument for the French reform initiative, with the politician being expected to outline the massive differences between taxes paid by the likes of Google and Facebook in Europe as compared to their tax rates in other countries. Some EU member states have been cracking down on major tax avoidance schemes for several years now, though countries like Luxembourg and Ireland still oppose any reforms and are strongly against the recently proposed changes. Apart from potential issues on the tax front, Google itself is currently being investigated by the European antitrust authorities in regards to its potential abuse of the Android operating system and AdWords advertising platform with the goal of unfairly promoting its other offerings after receiving a historic fine based on similar accusations pertaining to its online shopping comparison service.