French tax expert Valérie Farez of Pinsent Masons, the law firm behind Out-Law, said: “France’s 2021 finance bill, which will be debated in the French parliament, aims to prepare for the economic recovery from the coronavirus pandemic without incurring the tax burden for it increase in economic trouble “.
“The digital tax is expected to add at least € 350 million to the French budget and the French government believes it is legitimate to maintain a tax on digital businesses that it does not believe is suffering from the pandemic,” she said.
Last year, the US investigated the introduction of a tax on digital services in France, threatening to tax 100% of champagne and a number of French luxury goods. France agreed to suspend its digital tax collection until the end of this year as the US does not raise tariffs and continues to work with the Organization for Economic Co-operation and Development (OECD).
In February 2020, the French tax administration confirmed that companies responsible for digital tax could postpone the payment of the installments due in April and October 2020 to December 2020. These two installments equal the amount of digital tax due in 2019. The final amount due for 2020 will be paid in 2021.
The G20 asked the OECD to submit proposals by the end of this year to tackle the tax challenges posed by the digitization of the economy. In June, the US stopped participating in the OECD talks and US Treasury Secretary Steven Mnuchin warned that the discussions had “reached an impasse” and said the US could not agree, even temporarily, on changes to the international tax system.
In October, the OECD published detailed reform proposals, but said that an international agreement on the way forward was not expected until mid-2021.
In the meantime, EU Commission President Ursula von der Leyen has confirmed that the EU will introduce its own digital tax if no agreement is reached on digital taxation at the OECD by mid-2021. The EU Commission proposed an EU-wide digital tax in 2018, but it was rejected by countries like Ireland, Luxembourg and the Nordic countries, who feared it would reduce their revenues. In March 2019, the EU finance ministers agreed to concentrate on the OECD project and to leave the EU proposal in reserve if the OECD fails to reach an international agreement on time.
The French tax expert Eglantine Lioret from Pinsent Masons said: “By enforcing the French digital tax, despite threats from the US to take revenge by taxing French imported goods, the French government is putting pressure on the EU Commission and the OECD to swiftly take action Reach agreement on international digital tax “.
The delay in reaching an agreement has resulted in a number of countries introducing or introducing taxes on digital services for the revenues of digital businesses. These include the UK, Spain, Italy and Austria. The UK tax is in effect and is expected to start collecting in April 2021.
“Large digital companies want the certainty of an internationally agreed set of rules and not a multitude of unilateral measures that are likely to lead to double taxation,” said Eglantine Lioret.
“The main players in the digital economy will no doubt check whether the French digital tax complies with international tax treaties and EU law,” said Valérie Farez.
“However, two rulings by the Court of Justice of the European Union published in March mean that it will be difficult to challenge compliance with EU law through digital taxation,” said Farez
In the cases involving Hungarian Vodafone and Tesco Group companies, it was decided that special taxes levied in Hungary on the turnover of telecommunications operators and retailers are compatible with EU law, although the taxes are mainly from foreign owned companies as these companies had the highest turnover in the affected Hungarian markets.