After failing to obtain an EU-wide reform, France is going ahead with the implementation of a significant technology tax to be imposed on major tech companies, taking effect from the first day of the new year.
The digital tax will bring in an estimated €500 million per year to state funds, attempting to target advertising revenue streams as well as revenue obtained from the usage of personal data.
"The tax will be introduced whatever happens on 1 January and it will be for the whole of 2019 for an amount that we estimate at €500m," French finance minister Le Maire said in a press conference in Paris.
The move is a measure to curb the practice of shifting profits to low-tax regions. Although it's a common practice amongst major tech companies, it borders on tax evasion. What's more, tech companies contribute little to the countries from which they profit most. By implementing the tax, France has found a way to boost revenue while placating yellow vest investors.
Given that France and Germany have also been working on proposing a 3% tax on EU advertising sales starting in 2021, this move could very well act as a bellwether for other EU countries, potentially causing problems for tech giants like Facebook (NASDAQ: FB) and Google (NASDAQ: GOOGL).
The European Commission already has a proposal in place for a digital tax. This may be the spark needed to trigger member states into passing the proposal. In fact, the so-called "PACTE" law" is already in the works. This legislation aims to integrate the increasing accumulation of tech power into a modern economy through legitimate means.
"Our determination to obtain a unanimous European decision on a directive by March 2019 is complete," said Le Maire. "We will take steps with my German counterpart to convince the few states that remain opposed to this taxation of digital at European level. I hope that Europe will live up to its ambitions and its values."