France has stated that it will begin charging a 3% digital tax which will be implemented within 21 days and apply retroactively to January 1, 2019. While Trump has issued a statement calling for a retaliatory tax on French wine, the tech industry seems eerily quiet. Why?
The tax is designed to specifically target online advertising, online intermediary activities, and the sale of user data. A study conducted by Deloitte reveals that the reason the techs don’t care is because they will absorb just 5% of the 3%, consumers will pick up 55% and businesses will bear 40%.
So once again, the income redistribution will target consumers and small businesses, not billion dollar tech companies. They yawn.
For France alone they expect to rake in roughly $550 million annually which will be deposited into the government coffers along with their VAT tax, income tax, corporate tax, gas tax, wealth tax, stamp tax, professional tax, residence tax, local tax, payroll tax, gift tax, and land tax.
Interestingly, the amount of tariff/tax imposed on tech companies will likely equal the lost increase in gas tax that caused rioting in the streets for months.
Trump’s response is to tax French wine. The US imports roughly $2.1 billion annually and exports about $435 million. Of course, Macron and his finance minister are completely incensed that we would even consider such a measure claiming they are imposing a tax, and Trump would be imposing a tariff. It would seem, they don’t understand a tariff by definition is a ‘Tax’. Vive la France.
So what is really going on?
France’s budget deficit is slated to reach 3.4% of GDP next year, which overshoots the EU limit of 3%. But then France has not had a balanced budget since 1974. The reason for the deficit – France is considered a welfare state, thus Health care, pensions, assistance programs, and education account for the repeated inability to balance.
According to the EU rules that nobody abides by, a country’s debt ratio should not exceed 60%. France’s is 99%. The consequence? Nothing. The EU notoriously establishes rules but few countries take them seriously and haven’t for decades. It is no different than the Paris Climate Accord wherein the convenient wording is stipulated as “guidelines”. Thus everyone can sign it, but no one is obligated to actually adhere to anything – including Germany.
These inconsistencies are part of the reasoning for BREXIT. The European Union created a standard that all member countries are to abide by, and yet most simply don’t and haven’t since it’s formation. The Commission is thus another useless government authority collecting wages, accumulating pensions, and doing – nothing.
The companies that will be hit by this newly imposed 3% tariff include: Google, Amazon, Apple, and Facebook. Amazon has stated they applaud the Trump administration for defending fair trade. The others have given no comment.
While the EU Commission had recently ruled down such a tax, Macron defends his stance stating that France is a sovereign nation and can do whatever it wants. In addition he stated that between ‘allies’, “we can and we must resolve our disputes without resorting to threats”.