The French Finance Minister Bruno Le Maire has put down a red line: a European Union directive on a digital tax by the end of the year, or else.
France and other countries in the EU want to tax companies like Apple, Google, Facebook, and Amazon—international companies that work in the digital space. These companies have come in for criticism over the taxes they pay in European countries, and France just wants them to pay their fair share. The problem is, the EU can’t agree on how to do it.
France’s proposal has been in the wings since March of this year, but there hasn’t been much progress toward wider adoption. The plan would allow EU countries to tax internet companies’ profits earned inside their borders. At present, digital companies pay an effective tax rate of 9.5% in the EU, whereas traditional businesses pay an effective rate of 23.2%.
Other EU member states have concerns about the plan to tax these giants, however. They fear it may backfire on smaller countries, hurt innovation, or even draw retaliation from the United States, where most of the affected companies are based. Le Maire sees a different risk: that countries in favor of the tax may simply implement their own tax, regardless of whether the rest of the EU agrees or not, thus creating disproportionate tax rates across the region and undermining one of the central goals of the EU.
The EU isn’t the only governing body considering a digital tax. The UK announced last week that it would implement a tax by 2020. The Organization for Economic Cooperation and Development (OECD) is also conducting an analysis.