“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.” – John F. Kenedy.
France unveils new tax for global internet giants such as Google and Facebook.
Under this proposal, large companies operating in France would face a tax of three percent on their digital sales in the country.
Under EU law, internet giants can choose to report their income in any member state, prompting them to choose low-tax nations such as Ireland, the Netherlands or Luxembourg. Below is the list of Countries with their corporate tax rate.
| Country | Corporate Tax Rate % |
| Ireland | 12.5 |
| United Kingdom | 19 |
| United States | 21 (Prior – 35) |
| Netherland | 25 |
| China | 25 (15 – High Tech Firm) |
| Luxembourg | 27.08 |
| Germany | 29.79 |
| France | 33 |
However, the global internet giants have a much lower effective tax rate. A lot of companies take advantage of the lower corporate tax rate in some countries.
| Effective Tax Rate %: | 2018 | 2017 | 2016 |
| 12 | 53.4 * | 19.3 | |
| Apple | 18.3 | 24.6 | 25.6 |
| 12.8 | 22.6 | 18.4 | |
| Amazon | 9.4 | 4.9 | 2.7 |
| Alibaba | 14.7 |
*Google incurred one-time transaction tax in 2017.
2017 vs 2018 changes are due to US Corporate tax rate overhaul.
The actual amount paid as foreign tax is listed below. This includes all the foreign counties. The portion of a single country like France is much less. However, if the French legislation pass this bill, the actual tax paid in France will be much more.
| Provision for Income tax (Billion) | FY18 (Total) | FY18 (Foreign) |
| 4.1 | 1.2 | |
| Apple | 13.3 | 5.1 |
| 3.2 | 1.0 | |
| Amazon | 1.1 | 0.5 |
| Alibaba | 2.7 |
The estimated amount obtaining from the three percent tax on digital gross sales in France will be around $566 million in the first quarter of 2019.
According to France-press agency, in one of the most best known cases, the European Commission concluded that Apple had paid an effective corporate tax rate of just 0.005 percent ton its European profits in 2014 – equivalent to just 50 euros for every million.
Apple said last month it had reached an agreement to settle 10 years of back taxes, reportedly for nearly 500 million euros.
This new taxes will certainly have an impact, albeit small, to the net income of these internet giants like Facebook, and Google. About 30 companies from the US, China, Germany, Spain and Britain would be affected.
Disclaimer – Long position on all.
Arrow of Performance 