With some European nations unable to summon up the courage to tackle the infamous creative tax strategies of the internet giants, France has decided to write its own rules.
The topic of a digital tax which would span the length and breadth of the European continent was initially a popular one. Perhaps it was the camaraderie which swept the states into the tides of change, or maybe there as a brief window to score political PR points, though the momentum has not carried through. Initial plans were abandoned, water-down ones vetoed by self-interested nations, and France has had enough.
Announced on French national television, Economy and Finance Minister Bruno Le Maire laid out the new tax plans which will come into play on January 1. Over the course of the next twelve months, Le Maire believes the new structure will generate €500 million for the state.
“The digital giants are the ones who have the money,” said Le Maire. “[the internet players] make considerable profits thanks to French consumers, thanks to the French market, and they pay 14 percentage points of tax less than other businesses.”
It might not be the collective-push back against Silicon Valley which was initially proposed, but it is progress. Waiting for all 28 (soon to be 27) states to agree on a co-ordinated approach would have taken years, such is the bureaucratic struggle and the lobby power of the internet players, so it is quite refreshing for the French to say enough is enough and take a prominent stance against those who have been obviously and unashamedly abusing tax loopholes.
While many would point to the beauty of the European Union, offering scale to negotiate more effective trade deals, the beast has emerged from the shadows in this saga. For any meaningful changes to be implemented, all states would have to agree. This was always going to be a stumbling block. Sweden voiced concerns, unsurprising as Spotify was one of those firms in the crosshair, while Ireland vetoed on the grounds it would potentially damage trade relationships with the US.
Thankfully the French are not scared of said repercussions. Or perhaps we should be more accurate. There might be fear, but that does not mean the French are going to allow the internet players to run wild. The White House might suggest this is a tax aimed at the US economy, but that is irrelevant as far as we are concerned. This is a tax reform which is overdue.
Whether this inspires the other nations to move in the right direction remains to be seen, though the UK might not wait around either. Chancellor of the Exchequer Phillip Hammond has previously stated he, or the UK government, would not wait for the rest of Europe to hold Silicon Valley accountable.
Unfortunately, the most likely outcome is a fractured tax landscape, with some pushing forward more stringent rules and others getting bullied by the expensive lobbyists. This of course undermines the concept of the European Union, but also opens the door a crack for abuse.
The bureaucrats might attempt to colour in all grey areas, but very expensive lawyers in California will be pouring over any new rules attempting to find the weak spot. And in a fractured tax landscape, there is bound to be a few if you look hard enough.