• by Sean Hargrave , Staff Writer, March 7, 2019

After a considerable amount of talk in the EU, France has acted first. A bill was introduced yesterday by the country's Economy Minister to hit the tech giants with a 3% direct digital sales tax. It leads to the question of whether the UK's Chancellor will follow suit and turn talk of a 2% digital services tax into a reality.

The Telegraph makes it clear that the French move is a sign the authorities there are fed up on two fronts. The tech giants are legally able to avoid huge amounts of tax that would be payable if they were committed to paying their fair share. Secondly, Paris has become fed up with EU talk and decided the best way forward is to go it alone, perhaps for others to follow. 

The tax proposed in the new bill has been worked out to only hit the big tech companies. It is being nicknamed the "GAFA" tax, which stands for Google, Amazon, Facebook and Apple.

Only companies with revenues exceeding 750m Euros worldwide and more than 25m Euros in France will pay the new levy. This ensures that start-ups are not affected by the tax and only the aforementioned giants have to pay.

The French authorities estimate that around thirty companies will be impacted, mostly from the US but also from China. The tax would raise around 500m Euros per year, the finance ministry is suggesting.

Perhaps more importantly, however, it would be held up as an example that governments do not have to put up with global companies using smart accountants to (legally) ensure taxes are paid on profits in lighter tax regimes compared to where the original revenue was earned.

The Telegraph pulls no punches on this, pointing out that Ireland -- where many tech giants are based -- has consistently blocked new tax proposals to hit the tech giants with an EU-wide form of taxation that would be harder to avoid and ensure they pay a more fair share.

Everyone can be left to figure out for themselves why this may be. They may well come to the conclusion that Ireland is happy to be the low-taxation EU member where the tech giants prefer to be taxed while they actually earn the vast majority of EU revenue elsewhere -- particularly the neighbouring UK.

The big question now, of course, is if the French bill becomes law -- and there's no reason to suggest it won't -- will the UK follow? Chancellor Philip Hammond has repeatedly promised to levy a 2% digital services tax directly on tech giants' revenue. The latest suggestion is that it will need to be worked on later this year before a new tax is introduced in April 2020.

There is, of course, the whole issue of Brexit and with an extension to the UK leaving the EU almost certainly being signalled before the end of March, it is possible that the new digital services tax could be postponed too without the political will or bandwidth to push it through. There may well be an argument that acting alone would hurt the UK tech industry if the giants chose to retaliate by moving their huge offices and tech teams to another country in the EU. 

So, there is a lot to be decided and debated before the French tax becomes law and the UK decides whether it is also going to turn a threat into action.

One thing is for sure. The tech giants have had it way too easy over the past few years, and the screws are beginning to be tightened. Regulation is inevitable -- and so too is a higher tax bill.