Posted Oct 25, 2022, 5:02 PMUpdated on Oct 26, 2022 at 7:07 PM
The subject of controversy at the start of Emmanuel Macron’s first five-year term, the Gafa tax is today a budget line that hardly anyone looks at. However, if its performance is still modest, it has increased sharply since 2019. Bercy estimates that it will bring in 670 million euros next year. It is two and a half times what it represented in 2019, when it debuted.
This year, the tax on digital services (its official name) should bring 591 million euros into the state coffers. Forecasts for 2022 have been revised upwards to take into account the dynamics of activity. And it is “in view of the latest publications of the results of companies contributing to this tax” that Bercy has calculated the additional gains to be expected in 2023.
Who pays this tax? Questioned by “Les Echos”, the Directorate General of Public Finance indicates that 29 groups contributed for the 2019 financial year, 35 for 2020, and 37 for 2021. The number of companies liable for the tax for 2022 will only be known when the balance is paid next April. The main concerned are digital companies whose global sales exceed 750 million euros and 25 million in France, namely Facebook, Google and Amazon.
The tax, which consists of a levy of 3% on turnover, targets income from online advertising, the use of personal data and sales made on marketplaces. As such, Amazon is only taxed on its activities of linking buyers and sellers, when one of the parties is in France.
“It’s a very difficult tax to apply,” says Daniel Gutmann, in charge of tax doctrine at CMS Francis Lefebvre. “You have to segment the activities of a company to identify the revenues generated by the digital services concerned – intermediation and placement of targeted advertising – and then measure the share that is attached to French users”.
Companies in the sector were not necessarily able to make very precise calculations at start-up. The practice has undoubtedly improved over time.
Fair distribution of rights to be taxed
“The Gafa tax was invented to remedy the difficulty of levying corporate tax on companies unrelated to French territory”, also recalls the specialist. “The component of the reform conducted by the OECD to more fairly distribute the tax rights of the main multinationals (“pillar 1”) is supposed to be a more complete mechanism, which will therefore replace the Gafa tax”.
“I have always said that the day an international solution will be implemented, we will remove our tax,” promised the Minister of the Economy, Bruno Le Maire. However, the work carried out under the aegis of the OECD has been delayed. As the project manager explained recently, the way to calculate the turnover of a company in a given country – the revenues of Google in France for example – is not yet defined.
In addition to technical difficulties, the OECD is awaiting the outcome of the midterm elections in the United States in November to find out whether or not Washington will ratify the multilateral tax treaty, which should be completed by the end of the first half of 2023.
Cost passed on
The date of stopping the tricolor Gafa tax is therefore uncertain. In the meantime, and even if it had triggered trade retaliation from the Trump administration, it is painless for the digital giants who pass on the cost. Last year, Google thus increased by 2% the price of advertisements broadcast on its platform in France. Amazon has raised commissions charged to third-party merchants. Apple has reduced the amounts paid to application developers.
“This is called the incidence effect: when you tax turnover, companies very easily calculate the cost that this represents per transaction and can pass it on directly,” explains Daniel Gutmann. This is also why a turnover tax would not necessarily be a good idea for those who today want to make the “crisis profiteers” pay. In the end, it is the consumers who would bear a price increase.
The tax on financial transactions is approaching 2 billion
The financial transaction tax (FTT) is good business for public finances. Bercy expects 1.7 billion euros in revenue in 2023, after 1.5 billion this year and 1.1 billion last year.
“The significant increase in revenue for 2022 is mainly due to the growth of the tax base, the number of taxable companies increasing from 129 to 146”, indicates Bercy.
As a reminder, the French-style Tobin tax was introduced in 2012. Since 2016, its rate has increased from 0.2% to 0.3% and applies to purchases of securities of companies whose head office is located in France. France and whose market capitalization exceeds 1 billion euros. So-called “intraday” transactions are excluded.
A portion (528 million) is earmarked each year for the Solidarity Fund for Development.