France’s Digital Tax – level 3

13-12-2019 07:00

France and the US met to discuss how large tech companies that do business on the Internet should be taxed around the world.

France wants to tax the tech companies, and the US says that it wants to tax some of the companies because many of them come from the US. The country is threatening to raise taxes on French products as retaliation.

France disagrees and says that the companies are using global tax rules to shift their earnings to countries with lower tax rates. Then they can avoid paying higher taxes in the countries where they do business.

Thus, France passed a digital tax to try to change this situation by taxing profits made by tech companies in France by 3 percent. Italy, Austria, and Turkey have also passed similar taxes.

However, there is a worldwide movement to work on this situation at the Organization for Economic Cooperation and Development. An expert warns that solutions for just one country will make it harder to pass a worldwide solution. The organization will pass its digital tax proposals by the end of 2020.

France said that it will stop its digital tax when the organization creates its rules, but it will continue retaliation with the US if the US continues to raise taxes.

Difficult words: retaliation (an action to get revenge), shift (move), earning (profit, money that you earn on something).

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