France’s finance minister said on Thursday that major challenges for France is being posed by the way large U.S. firms are taxed in the European Union.
An “equalization tax” for tech companies across the EU — a potential new policy that is set to disrupt the way companies operate in Europe, has seen Bruno Le Maire, the recently appointed French finance minister, is at the forefront of the initiative to impose the tax.
“We have a huge challenge with the question of the GAFA (Google, Apple, Facebook, Amazon),” Le Maire said at the Women’s Forum in Paris. “You’ll think that I am obsessed by the United States — that’s not the case. We just want to have fair trade in the world,” he said.
Taxing companies on their revenues rather than on their profits is one of the biggest proposals. Taxing the latter would usually culminate in a smaller number. Companies have bene taking advantage of different tax codes across the 28 European member countries, which has allowed many of them to pay little tax in some countries and the idea with an “equalization” tax is to avoid firms taking such advantages.
Compared to larger firms, it was hard to explain to smaller firms why they were paying much more tax in France, on a relative basis, Le Maire said.
“We are of the view that we can’t explain to small companies in France … That they are obliged to pay the taxes in France and of course huge taxes because we are still in France and other great companies, huge companies, huge internet companies like Google, Facebook, Amazon, can be in France, have their profits, make some benefits in France and high benefits in France without paying any taxes to the French Treasury,” Le Maire said.
When the media tried to contact, there were no comments immediately available from Google, Facebook, Amazon and Apple. Many large U.S. tech firms book the majority of their European profits in those countries by basing their European headquarters in EU nations with favorable tax regimes.
The online retailer Amazon has to pay back nearly $300 million in unpaid taxes as it benefited from illegal tax benefits in Luxembourg, the European Commission ruled on Wednesday. Recouping of 13 billion euros ($15.2 billion) in back taxes from Apple by Ireland was also ordered by the EU last year. But accusations of trying to hurt U.S. firms have been often labelled against the Commission.
it seems that the European Union is backing rising protectionism and thus helping its own companies against competition from U.S. firms, said Paul Gambles, managing partner at MBMG Group.
The idea that asking U.S. firms to pay the right amount of taxes is financial protectionism was rejected by Le Maire. He said that it is a question of fairness.
(Adapted from CNBC)