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Facebook to pay France €106 million in back taxes: Report

France, phones, Mona Lisa

Facebook France has agreed to pay €106 million (~₹930.5 crore) in back taxes, including €22 million (~₹1.93 crore) in penalties, to the French tax authorities, French finance magazine Capital reported. As per the Capital’s calculations, Facebook has declared only half of its actual €1.3 billion turnover in France to the tax authorities. According to Facebook’s response to the magazine, these back taxes cover 2009 to 2018.

France has been on a spree of bringing American Big Tech to heel when it comes to paying taxes in the country. Last year, Apple had agreed to pay nearly €570 million (~₹5,000 crore) in back taxes in a confidential transaction with the French Ministry of Economy and Finance, L’Express had reported. Similarly, Google had also agreed to pay nearly €1 billion (~₹8,771.5 crore) to the Ministry in September 2019, of which €465 million were taxes and €500 million were fine.

Europe has been facing considerable problem with appropriately taxing large American technological firms. Most companies, including Facebook, Google Apple, pay bulk of their taxes due in Europe in Ireland where they have set up their headquarters as the country has low corporate tax rates.

Not France’s only attempt to tax Big Tech

France has been in the process to implement its 3% digital tax, colloquially known as “Les GAFA” (after Google, Apple, Facebook, Amazon), on digital companies that have a revenue of more than €25 million in France, and more than €750 million worldwide, since last year.

When this tax was approved in July 2019 by the French Senate, it was meant to be a temporary solution, a placeholder until the Organisation for Economic Cooperation and Development (OECD) reached an international agreement to overhaul its decades-old cross-border tax rules. Paris had reportedly offered to suspend its digital tax until the end of 2020 as an international deal was negotiated but the fallout from the COVID-19 pandemic upended those plans. OECD has moved the deadline to iron out the agreement from July 2020 to October 2020 because of the pandemic.

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But in May 2020, French Finance Minister Bruno Le Maire said that France would go ahead with its tax irrespective of whether an international deal is reached or not. Other European nations, such as Turkey, Italy, Austria, Czech Republic have already imposed their versions of digital taxes. After the US pulled out of talks on the issue, finance ministers of the UK, France, Spain and Italy had initially planned to go ahead with their taxes in June, but eventually caved a week later after the US threatened them with tariffs.

India is also looking at a digital tax

These taxes are similar to the 2% equalisation levy that the Indian government brought into effect on April 1, 2020, which is imposed on the sale of goods or services by a non-resident e-commerce operator in India. Even as a number of lobby groups called this levy discriminatory in their submissions to the US Trade Representative, the Indian government has stood by it.

The Indian government had earlier imposed a 6% equalisation levy on digital advertising services offered by non-resident providers in 2016. India has, for quite some time now, seeking to tax digital companies on the basis of their economic presence. To that end, Finance Minister Nirmala Sitharaman had called for adoption of the “significant economic presence” concept to tax global digital companies at the G20 Finance Ministers and Central Bank Governors’ Meeting in June 2019.

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