United Kingdom government drafts Digital Services Tax legislation

Expect a lot of legal challenges said Giuseppe de Martino president of the French tech industry group ASIC. Stock image

Expect a lot of legal challenges said Giuseppe de Martino president of the French tech industry group ASIC. Stock image

The French tax is expected to be enacted within 21 days and will be applied retroactively from January 2019.

France's digital-services tax could be seen as a test case for other European countries to introduce similar tax regimes.

"It's a taxation on revenues (and not on profits), encouraging companies to reduce their level of investments and innovation", he said. Hours after the French vote, the United Kingdom released its own draft proposal for a 2% digital services tax.

Recently proposed EU-wide tax changes have had their implementation delayed until late 2020; but a bill, just passed by the French Senate, requires tech companies with more than $750 million in global revenue and €25 million in French revenue, to pay a 3% tax on their total annual revenue on French services.

But French Economy Minister Bruno Le Maire France rejected the United States reaction, saying "threats" were not the way to resolve such disputes. France forecasts that the tax could bring in as much as €500m a year.

They argued that America's argument that the companies, also including Apple, are already being taxed at their headquarters in the United States and should not be subjected to another tax.

The tech industry is warning that consumers could pay more.

Earlier this year, the European Commission outlined proposals for a 3pc tax on revenues of large internet companies with global revenues above €750m per year, but this move was met with the same criticism that met France's decision from those who believe that this type of tax breaches worldwide rules on equal treatment for companies around the world.

Tech giants face payments in the tens of millions under the measure.

US Trade Representative Robert Lighthizer said in a statement ahead of the adoption of the French law that Washington was "very concerned" it would "unfairly" target American companies. In the first quarter of this year, for instance, Amazon's share of French e-commerce went down slightly, but the American retail behemoth still controlled no less than half of France's online trade.

Both pieces of legislation apply only to the biggest tech companies, many of which are American. Tech companies like Amazon disputed France's tax on Thursday arguing for a multilateral approach instead.

British finance Minister Philip Hammond had announced such a tax already past year, but is now determined to go on with it, as an global agreement on the matter seems to be unlikely to get a short time resolution. The French government said that this is a temporary measure that will be applied until the European Union and wider world can reach an agreement on how to tax major tech companies more effectively.

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