France has become the first country in the world to levy a "digital tax" on internet giants such as Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB)
The French government estimates that the new tax could bring in €400 million ($588 million Cdn) this year and €650 million ($955 million) in 2020. The French "digital services tax" imposes a 3% annual levy on French revenues of digital companies with yearly global sales worth more than €750 million ($1.1 billion Cdn) and French revenue exceeding €25 million ($36 million Cdn).
The tax’s purpose is to stop multi-national corporations from avoiding taxes by setting up headquarters in low-tax European Union countries. Currently, the companies pay nearly no tax in countries such as France where they have large operations and global sales. The new tax primarily targets companies that use consumer data to sell online advertising.
The impacted technology companies have warned that the digital tax could lead to higher costs for consumers. Late Wednesday, the administration of U.S. President Donald Trump announced an investigation into the tax under the provision used last year to probe China's technology policies, which led to tariffs on $250 billion U.S. of Chinese imports.
U.S. Trade Representative Robert Lighthizer expressed concern that the tax "unfairly targets American companies." Lighthizer's agency will investigate the tax under Section 301 of the Trade Act of 1974
