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Amazon will pass on digital tax to French businesses using its service

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Amazon will pass on digital tax to French businesses using its service
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US online retailer Amazon is planning to make French businesses using its platform pay France's new digital tax instead of taking the hit itself, the company announced on Thursday.

The GAFA tax (an acronym for Google, Apple, Facebook, and Amazon) put France at the forefront of countries seeking to force big tech companies to pay more taxes in the markets they operate, which has not gone without threats of retaliation from the US.

As it stands, tech giants pay little or no corporate tax in countries where they do not have a large physical presence. They declare most of their profits where they are headquartered.

Read more: What is France's new digital tax?

The 3% levy is due to kick in retroactively from the start of 2019. It will tax profits from online sales for third-party retailers, digital advertising, and the sale of private data.

France economy's ministry said around 30 large companies would have to pay the tax, especially those with global revenues of at least €750 million and revenue of at least €25 million in France alone.

“As we operate in the very competitive and low-margin retailing sector, and invest massively in creating new tools and services for our clients and vendor partners, we cannot withstand an additional tax,” the company told AFP in a statement.

“This could put smaller French firms at a competitive disadvantage to their peers in other countries, and like many others, we have alerted the authorities,” it said.

But in a statement to Euronews, France's economy ministry said the tax was “was above all a question of fiscal justice”.

“Amazon has chosen to pass on the costs of this tax to the small and medium-sized enterprises that use its services. There is nothing obliging them to do so,” the ministry said.

Read more: Vintage Trump as US president threatens to tax French wines

“This principle isn’t enshrined anywhere in the law creating the tax.”

France has said it will remove the tax if a similar measure is agreed internationally.

The OECD is conducting multilateral discussions over how to tax international technology companies. The US said it would continue those discussions while conducting its own examination.

The European Commission estimates that on average traditional businesses face a 23% tax rate on their profits within the EU, while internet companies typically pay 8% or 9%.

Imposed all across the EU a similar tax would collect around €5 billion per year.

Brussels' efforts stalled since an EU-wide levy has to be approved by all members, but Ireland, the Czech Republic, Sweden and Finland raised objections.

Donald Trump has instructed his most senior trade official to conduct a so-called Section 301 investigation into France's digital services tax and pledged to retaliate with a new taxes on French wines.

He is set to give a statement on trade with the EU on Friday at 7:45 pm CEST, reported Bloomberg citing the White House.