France’s tax on tech giants passes first vote

The lower house of the French parliament has voted in favor of the new tax on tech giants without any modification. Big tech companies that generate significant revenue in France will be taxed on their revenue generated in France.

Economy Minister Bruno Le Maire has been lobbying other European countries so that big tech companies would stop optimizing their European corporate structure to lower their effective tax rate.

But changing taxation rules in Europe is a tough road. You need to convince every single member of the European Union and get a unanimous vote. Some European countries that attract a lot of regional headquarters for tech giants weren’t on board.

The French government didn’t want to wait and wrote this new piece of legislation. So here’s what’s happening. If you’re running a company that generates over €750 million in global revenue and €25 million in France, you will have to pay 3 percent of your French revenue in taxes.

This tax is specifically designed for tech companies in two categories — marketplace (Amazon’s marketplace, Uber, Airbnb…) and advertising (Facebook, Google, Criteo…).

It’s a weird taxation model as it is based on revenue and not profit. It’ll also require some work from the taxation administration, as French revenue means that it involves all transactions with somebody with a French mailing address or a French IP address. France expects to generate €400 million in revenue with this new tax in 2019.

Eventually, Le Maire hopes that other European countries will change their mind. The OECD has also been working on a way to properly tax tech companies with a standardized set of rules.

If the European Union or the OECD find a way to properly tax tech companies in countries where they operate, the French government says that it would replace today’s new tax.

The upper house of the French parliament will now debate and vote for the plan. But it seems like it’ll be an easy one.