France Blames US for Blocking Digital Tax Negotiations
French Finance Minister Bruno Le Maire accused the US earlier this week of undermining the ongoing negotiations for the establishment of a global tax system for the digital economy.
The OECD and about 140 countries are currently working on a final blueprint for the taxation of digital tech giants such as Google, Apple and Amazon, but the US has insisted that any agreement should include a voluntary opt-in mechanism for American companies, an addition that would render the OECD’s plan toothless.
Le Maire said, “It’s very clear, the United States don’t want a digital tax (deal) at the OECD. So they are making obstacles that prevent us from reaching an agreement even though the technical work is done.”
France’s Finance Minister also warned the US to prepare for a EU-wide digital tax on large tech companies if the OECD-led negotiations in October fell through.
Le Maire added, “If the U.S. blockage is confirmed by year end, we are counting on the European Union to make a formal proposal to tax digital activities in the first quarter of 2021.”
However, countries like Ireland and the Netherlands have benefited immensely from the accounting practices espoused by many of these large multinational tech firms and may not ultimately agree to the setting up of a EU-wide digital services tax.
Despite these countries’ past opposition to a pan-European digital tax regime, Le Maire believes Ireland will agree to the imposition of such a levy.
Le Maire said, “I have full confidence that Irish Finance Minister Paschal Donohue would live up to a promise to support such a tax, even though Dublin has shot down previous attempts at the EU level.”
GAFAs to Pass on DST Surcharge to Customers in the UK
Several countries including France, Spain and the UK have set up unilateral digital services tax while waiting for the OECD to finalize its own plans for the digital economy.
In response, several American tech companies have decided to pass the extra costs onto the consumers, particularly in the UK.
As reported by The Verge’s James Vincent, Apple, Google and Amazon will all change the way they charge customers as a result of the UK’s two percent DST.
According to Vincent, “Apple is changing how it pays developer fees on the App Store in the UK,” where “on top of the usual 20 percent VAT it pays to the government on each purchase it’s adding an extra two percent before splitting what remains between the developer and Apple, meaning less money for both.”
Google, on the other hand, will increase by two percent the price for any ad placed on Google Ads or YouTube in the country.
A Google spokesperson said about this change: “Digital service taxes increase the cost of digital advertising. Typically, these kinds of cost increases are borne by customers and like other companies affected by this tax, we will be adding a fee to our invoices, from November. We will continue to pay all the taxes due in the UK, and to encourage governments globally to focus on international tax reform rather than implementing new, unilateral levies.”
Similarly, Amazon will apply the same surcharge to third-party sellers.
In a forum for Amazon sellers, the company said, “We will be increasing Referral fees, Fulfilment by Amazon (FBA) fees, monthly FBA storage fees and Multichannel Fulfilment (MCF) fees by 2% in the UK to reflect this additional cost.”