Tech companies earn a lot of money and governments are aware of this fact. According to the finance ministry of France, it notified big tech companies liable for its digital service to pay the levy as planned in December. As a reminder, this year, the country suspended collection of the tax, which will affect companies like Facebook and Amazon. The country decided to suspend the collection of the tax while negotiations were underway at the Organisation for Economic Cooperation and Development (OECD) on an overhaul of international tax rules.
People should keep in mind that the finance ministry made it clear a long time ago that it would collect the tax in December as planned if the talks proved unfruitful by that period of time. That’s exactly what happened when the nearly 140 countries involved agreed in October. Countries made the decision to prolong the process of negotiations until mid-2021.
According to a ministry official, companies subject to the tax received their notice to pay the 2020 installment. It is worth mentioning that France last year applied a 3% levy on revenue from digital services earned in the country. This tax covered companies with revenues of more than 25 million euros in the country and 750 million euros around the world.
The position of tech companies
Interestingly, Facebook and Amazon made it clear that they will pay the tax. According to Facebook, the company complies with all tax laws in the jurisdictions where the company operates. Facebook received its tax bill from the French authorities.
Moreover, Amazon received a reminder from the French authorities to pay the tax. Based on the information provided by a person familiar with the matter, Amazon will comply with this decision.
It is worth noting that Paris will withdraw the tax as soon as the OECD reaches an agreement. Countries have to reach a deal regarding the rules on cross-border taxation for the age of online commerce. They will have to update the rules. As a reminder, big internet companies can book profits in low-tax countries despite the fact where their customers are living. Importantly, the talks stalled as the Trump administration became reluctant to sign on to a multilateral agreement.
According to Bruno Le Maire, who serves as Minister of the Economy and Finance, the country’s goal is to reach an OECD agreement by the first months of 2021. As stated above, tech companies earn billions of dollars. Joe Biden will replace Donald Trump in January, so his position regarding the digital service tax will play an important role, as he may or may not agree with the deal.