The Finance Minister of France, Bruno Le Maire, set off a firestorm of controversy last month when he proposed a hefty ‘digital tax’ on internet giants like Apple, Facebook, Amazon, and Google — as well as smaller companies that exist mainly in the cloud and have been making good money from French online consumers. The new tax, which the French government prefers to call a three-percent import duty, will affect any company that does more than 25 million euros worth of business in France per annum.
The United States was quick to respond to the proposed new tax by threatening to impose higher tariffs on imports from France such as cheese and champagne.
Silicon Valley views the French digital tax as a flagrant breach of so-called backdoor agreements that in the past have protected American internet companies from direct taxation on profits from European countries, and in return the American companies would build a certain amount of infrastructure overseas to funnel income into those countries in the form of construction contracts and the creation of new permanent office and warehouse jobs.
But now all bets are off, as France pursues this new tax initiative.
The current Davos economic summit may help cool things off, since there is a proposal on the table that would limit any such digital taxes to a mere .05 percent. Which is much more palatable to Silicon Valley and Uncle Sam.