News Analysis: Can France's unilateral digital tax work?

PARIS, March 7 (Xinhua) -- AFTER the setback in Brussels to reach a European Union (EU) wide tax on the world's top internet firms, French President Emmanuel Macron's government is pushing ahead on its own to impose digital tax to "build the taxation of the 21st century" and "restore fiscal fairness," although, questions have already arisen on whether the due tax will really work.

UNILATERAL tax

On Wednesday, Finance Minister Bruno Le Maire presented the taxation plan during a cabinet meeting, paving the pay for the country to unilaterally tax tech giants by three percent on much of their digital sales in France, which are related to advertising, websites and the resale of private data.

"These digital giants use our personal data ... make considerable profits on these data ... and then repatriate them elsewhere without paying their fair share of taxes," the minister told reporters.

"It is necessary to tax the value where it is created. Always more margin and always less tax, it's simply impossible," he added, noting that digital giants pay 14 percent less tax than small- and medium-sized European companies.

Dubbed GAFA, the planned taxation targets digital companies with global annual sales of more than 750 million euros (841.71 million U.S. dollars) and sales in France of at least 25 million euros.

Introduced in France from Jan. 1, this tax on digital gross sales would help collect 400 million euros this year and 650 million euros by 2022.

This "is a question of fiscal fairness" and a "first step" in the implementation of "a twenty-first century taxation, on which everyone agrees that it is time to act," Le Maire stressed.

France has pushed efforts at the EU and on the international scale to change rules that currently enable tech companies such as Facebook and Google to reduce their tax bills by booking revenue in low-tax countries like Ireland and Denmark

Its initiative was driven by domestic budget concerns and the need to seek for new sources to compensate extra-spending of emergency measures to address "Yellow Vest" social uprising.

DIVIDED OPINIONS

According to Nicolas Doze, an economy analyst, the government's new tax was "a good political message but a bad fiscal tool."

"taxing the turnover before the companies realize any euro of profit is an economic no sense. Furthermore, it's the consumers who will undergo the consequences as the tech groups will pass this tax on in selling prices," Doze told news channel BFMTV.

"It's also a headache for the finance ministry. How it can collect this tax and define a fiscal basis knowing that these companies' turnover data are very hard to identify," he added.

Despite Paris push to reach a quick solution to offset loss of millions of euros of tax revenue due to digital giants' shift of taxable profits to lower-tax countries, EU finance ministers failed to agree Europe-wide tax on the biggest internet groups such as Google, Apple, Facebook and Amazon by the end of the year, AFTER Sweden, Denmark and Ireland opposed the plan on fears of U.S. retaliations.

Furthermore, the 28-member bloc is also divided on how to resolve the disputed issue on where digital firms' cross-border income should be taxed.

"It's far too easy for companies to shift their profits around between countries. By moving the place of taxation, where will go the tax profits?" Michel Devereux, professor at Oxford Said Business School, told France 24 television.

To answer the question, "an international cooperation is required to really fix the tax on profits," he added.

Meanwhile, some others saw the other face of the coin, suggesting that France's move was a promising debut of a broader tax rules for the digital era.

"There are experts who say that France should not tax revenue and others say that this tax will be practically impossible. All this is true, but it did not matter because what's new and significant is that the world's powers ... agreed to impose GAFA tax," said Alain Duhamel, a political analyst.

Speaking to RTL radio, Duhamel noted that the Organisation for Economic Cooperation and Development's draft deal to propose a tax at the international level "has chances to be adopted this year," in a way to transform French proposal from "an isolated initiative to a true change of power balance." (1 euro = 1.122 U.S. dollar)