With efforts to impose either a digital advertising tax or digital sales tax on large companies seemingly stalled at the EU level, a number of countries have moved ahead on their own. The latest are France and Austria.
In France, the French Finance Minister announced on March 5, 2019 that a proposal for a national digital services tax (DST) would be introduced and considered by the French legislature. The tax would apply to large internet companies serving as intermediaries between customers and suppliers, and to companies that sell personal data to advertisers. The tax would be 3% on revenues derived from those activities and would apply retroactively from January 1, 2019. Companies with worldwide digital revenue of 750 million euros and French revenue of 25 million euros would be liable for the tax. About 30 companies worldwide, including U.S. giants Google, Amazon, Facebook, and Apple, would pay the tax as it is currently proposed.
The Unites States has voiced objections to digital tax proposals in the EU and did so again with respect to the proposed French tax at an April 4, 2019 meeting between the U.S. Secretary of State and the French Foreign Minister. The French responded that such a tax is needed to insure fair taxation of commerce and urged the U.S. to join France and others in persuading the OECD to reach an internationally agreed-upon solution to taxing the digital economy.
The French National Assembly Finance Committee has now adopted draft legislation that would impose the proposed DST, which will soon be presented to the full National Assembly.
Meanwhile, Austria is proposing to impose a 5% digital advertising tax (DAT). The tax would apply to online advertising revenue of large companies, which are again defined as those with 750 million euros of global sales, with 25 million euros of such sales linked to digital advertising in Austria.
In addition, Austria is proposing to require “digital agency platforms,” which is a reference to such companies as Airbnb, to begin reporting all bookings and sales to the tax authorities beginning in 2020. According to the government, if such companies fail to comply, they will themselves become responsible for taxes not paid by those who list properties on the company sites. The proposal is similar to reporting and collection requirements already imposed by Estonia, France, and Denmark.
These proposals are representative of many that target the activities of digital companies, and if widely enacted will increase costs for both Worldwide ERC® members and their transferees and assignees.