U.S. tech firms like Apple, Amazon posing a ‘huge’ tax challenge for France

The way large U.S. firms are taxed in the European Union (EU) is posing major challenges for France, the country’s finance minister told CNBC on Thursday.

Bruno Le Maire, the recently appointed French finance minister, is at the forefront of an initiative to impose an “equalization tax” for tech companies across the EU — a potential new policy that is set to disrupt the way companies operate in Europe.

“We have a huge challenge with the question of the GAFA (Google, Apple, Facebook, Amazon),” Le Maire told CNBC at the Women’s Forum in Paris. “You’ll think that I am obsessed by the United States — that’s not the case. We just want to have fair trade in the world,” he said.

One of the biggest proposals is to tax companies on their revenues rather than on their profits. Taxing the latter would usually culminate in a smaller number. The idea with an “equalization” tax is to avoid firms taking advantage of different tax codes across the 28 European member countries, which has allowed many of them to pay little tax in some countries.

Le Maire said that it was hard to explain to smaller firms why they were paying much more tax in France, on a relative basis, compared to larger firms.

“We are of the view that we can’t explain to small companies in France … That they are obliged to pay the taxes in France and of course huge taxes because we are still in France and other great companies, huge companies, huge internet companies like Google, Facebook, Amazon, can be in France, have their profits, make some benefits in France and high benefits in France without paying any taxes to the French Treasury,” Le Maire said.

Google, Facebook, Amazon and Apple were not immediately available for comment when contacted by CNBC. Many large U.S. tech firms base their European headquarters in EU nations with favorable tax regimes, that often means they book the majority of their European profits in those countries.

The European Commission ruled Wednesday that the online retailer Amazon benefited from illegal tax benefits in Luxembourg and has to pay back nearly $300 million in unpaid taxes. Last year, the EU also ordered Ireland to recoup 13 billion euros ($15.2 billion) in back taxes from Apple. The Commission has often been accused of trying to hurt U.S. firms.

Paul Gambles, managing partner at MBMG Group, told CNBC that it seems that the European Union is backing rising protectionism and thus helping its own companies against competition from U.S. firms.

Le Maire rejected the idea that asking U.S. firms to pay the right amount of taxes is financial protectionism. It’s a question of fairness, he said.

Source: CNBC