MercoPress. South Atlantic News Agency

France demands online technology giants to pay a “new digital tax” on 2020 profits

The French move risks escalating a long-running fight over how to make US tech multinationals pay a larger share of their taxes in the countries where they operate

France will require online technology giants to pay a new “digital tax” on their 2020 earnings, the finance ministry said on Wednesday, despite Washington's warning that it could retaliate with new tariffs on French imports.

“The companies subject to this tax have been notified,” a ministry official said, referring in particular to the US firms Google, Amazon, Facebook and Apple, which the US says are being unfairly targeted by the levy.

The French move risks escalating a long-running fight over how to make American tech multinationals pay a larger share of their taxes in the countries where they operate.

Under EU law, American companies can declare their profits from across the bloc in a single member state - in most cases low-tax jurisdictions such as Ireland or the Netherlands.

Under pressure to take a harder line, France enacted its digital tax in 2019 which calls for a 3% levy on the profits from providing online sales for third-party retailers, as well as on digital advertising and the sale of private data.

But Paris reached a deal with the administration of US President Donald Trump to suspend the tax while seeking a global digital tax deal under the auspices of the Organization for Economic Co-operation and Development (OECD).

But Trump has warned that punitive duties of 25% on US$ 1,3 billion worth of French products including the country's renowned cosmetics and handbags.

In October, the OECD acknowledged that it would not reach a deal on a new global standard for taxing digital firms this year as hoped, largely because of US opposition to the proposals.