Report on Supply Chain Compliance 3, no. 3 (February 6, 2020)
France has agreed[1] to suspend collection of the Google, Apple, Facebook, and Amazon, or “GAFA” digital tax until the end of the year, allowing for a period of discussion between the United States, representing major tech companies, and government authorities seeking to raise revenue from digital transactions. The United Kingdom and Italy also have plans to institute a digital tax. U.S. Department of Treasury Secretary Steven Mnuchin threatened both countries with tariffs[2] if they follow through with the tax.
The French digital services tax law imposes a 3% tax on annual revenues generated by some companies that provide certain digital services to, or aimed at, French users. The tax applies only to companies with annual revenues from the covered services of at least EUR 750 million globally and EUR 25 million in France. The services covered are ones where U.S. firms are global leaders.[3]
The digital tax is an attempt by national governments to gain a piece of the very large pie created by the digital economy. Currently, companies like Alphabet’s Google LLC; Amazon.com, Inc.; and Facebook, Inc., conduct business across borders—making billions in profits—but pay very little in taxes to any government by taking advantage of tax havens around the world.
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