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France Eyes EU Data Transfer Tax

by Ulrika Lomas,, Brussels

26 September 2013

France aims to push forward the idea of a tax to be imposed on data transfers outside of the European Union (EU) at the upcoming European summit meeting due to be held on October 24 and 25.

Furthermore, the French Government intends to task the European Commission with drafting a series of proposals for other new tax rules for digital companies by Spring 2014, to guarantee that the profits realized by these companies on the European market are subject to fair taxation. Revenues would subsequently be distributed among the EU member states.

Together with Germany and the UK, France is spearheading the drive at European level to close existing tax loopholes, which currently allow US Internet and other digital giants to avoid paying too much tax on business activities conducted in Europe.

European telecommunications operators, such as Orange, Telefonica, and Vodafone, have also been calling for change, lamenting the fact that these corporations use their services while paying just a fraction of the taxes imposed on telecoms companies responsible for setting up and maintaining the networks.

French Digital Economy Minister Fleur Pellerin is to hold an informal meeting with her European counterparts in Paris next week, ahead of the October 24 formal gathering. Pellerin intends to prepare the groundwork for the upcoming summit with its focus on the digital economy.

It remains to be seen as to how well France's proposals will be received by the rest of Europe. France recently backtracked on plans for a specific national tax on the digital sector, after the National Digital Council (CNN) advised against a national levy. The CNN warned that a national levy imposed on the sector would merely serve to penalize consumers and French companies without meeting its intended target.

Furthermore, a national digital tax would prove dangerous for the attractiveness and competitiveness of France as a location, and would not address the key problem of multinational tax avoidance, the Council stressed, advocating instead that the Government spearhead an initiative at European level, encouraging a European approach to the problem, if necessary within the framework of enhanced cooperation.

TAGS: tax | business | European Commission | tax avoidance | corporation tax | France | Germany | tax breaks | European Union (EU) | services | Europe | Economy

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