France recently approved a 3% tax on revenues generated by large digital companies in its territory, a move that is now being investigated as a potentially unfair trade practice by the U.S. government.
The Problem with France’s Plan to Tax Digital Companies
France recently approved a 3% tax on revenues generated by large digital companies in its territory, a move that is now being investigated as a potentially unfair trade practice by the U.S. government. France’s legislation is a concrete step of a European Union proposal, which has been years in the making, to tax American tech giants such as Alphabet, eBay, and Facebook. Emboldened by the EU stance, Asian and Latin American countries have begun discussions on how to tax tech giants on revenues earned in their territories. If implemented, these proposals have the potential to shift billions of dollars from tech companies to local economies. The authors argue that one-size-fits-all taxation of large digital firms based on gross revenues is too blunt an instrument to address the putative budgetary deficits of local governments. They call for a more substantial debate on the issue and more imaginative ideas to ensure fair and effective taxation.