Silicon Valley hit with new digital tax in France

The French government on Wednesday introduced a new levy aimed at big tech giants, adding to the momentum behind more than a dozen similar measures globally that could collectively cost Silicon Valley companies billions of dollars.

The measure, likely the first in a wave of proposed digital-services taxes to be applied in Europe, will apply a 3% tax on French-sourced revenue that companies like Alphabet’s Google or Amazon.com reap from specific services like targeted advertising or running a digital marketplace.

The new French tax will intensify pressure on the U.S. in a new round of multilateral talks, shepherded by the Organization for Economic Cooperation and Development, about how to overhaul the corporate taxation system for the digital age. France and other European countries want a system that allocates more of Silicon Valley’s profits to their territories for taxation.

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In part to head off the threat of a patchwork of unilateral taxes like this one, the U.S. is now offering its own compromise about how to do so—though it opposes measures that target digital companies in particular and suggests focusing on overseas marketing spending.

The French tax will apply retroactively to the beginning of 2019, making it one of the first such taxes to go on the books anywhere in the world. French officials say they expect it to bring in €400 million in 2019, rising to €650 million by 2022.

French President Emmanuel Macron’s party controls a large majority in parliament, which makes the measure likely to pass when it comes up for debate in April.

“These giants use your personal data and make a significant profit from it, without paying their fair share of tax,” Finance Minister Bruno Le Maire said.

Google and Facebook each said they pay all the taxes they owe in every country where they operate. A Google spokeswoman said the company pays the “vast majority of its corporate income tax” in the U.S., while a Facebook spokesman said the company backs the OECD talks and pointed to a change it made in 2017 to collect some revenue from its ads in countries where it operates.

Amazon declined to comment and Apple didn’t immediately have any comment, but both companies have in the past said they pay all the tax they owe.

Click here for more from The Wall Street Journal, where this story was first published.