France orders big tech companies to pay tax for digital service

French Prime Minister Jean Castex and Economy and Finance Minister Bruno Le Maire, wearing protective face masks, leave after the weekly cabinet meeting at the Elysee Palace in Paris, France.

France’s finance ministry has sent out notices to big tech companies liable for its digital service tax to pay the levy as planned in December, the ministry said on Wednesday.

France suspended collection of the tax, which will hit companies like Facebook and Amazon, early this year while negotiations were underway at the Organisation for Economic Cooperation and Development (OECD) on an overhaul of international tax rules.

The finance ministry has long said it would collect the tax in December as planned if the talks proved unfruitful by then, which is what happened when the nearly 140 countries involved agreed last month to keep negotiating until mid 2021.

“Companies subject to the tax have received their notice to pay the 2020 instalment,” a ministry official said.

France last year applied a 3% levy on revenue from digital services earned in France by companies with revenues of more than 25 million euros there and 750 million euros worldwide.

Facebook’s stance “is to ensure compliance with all tax laws in the jurisdictions where we operate”, it said, adding it had received its tax bill from the French authorities.

Amazon has received a reminder from the French authorities to pay the tax, and will comply, according to a person familiar with the matter at the online retailer.

Paris has said it will withdraw the tax as soon as an OECD deal is reached to update the rules on cross-border taxation for the age of online commerce, where big internet companies can book profits in low-tax countries regardless of where their customers are.

The talks stalled as the Trump administration became reluctant to sign on to a multilateral agreement, officials have said.

“We will levy this digital taxation mid December as we always explained to the U.S. administration,” French Finance Minister Bruno Le Maire told a Bloomberg event on Monday.

“Our goal remains to have an OECD agreement by the first months of 2021,” he said.

Dan Neidle, a partner at law firm Clifford Chance, was sceptical U.S. President-elect Joe Biden would agree to such a deal.

“I’m not sure why Biden would agree to something which enables U.S. corporations to pay more tax in Europe and has not many benefits to the U.S.,” said Neidle.

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