French digital tax 'complicates Donohoe task over Ireland's tax firepower'  

UCC's Seamus Coffey, a former head of the Irish Fiscal Advisory Council, said the move could also open the threat of trade retaliation by the US if it feels France is targeting American companies
French digital tax 'complicates Donohoe task over Ireland's tax firepower'  

Paschal Donohoe, Minister for Finance has a difficult task ahead. File picture: Sasko Lazarov / RollingNews.ie

The push ahead by France to levy its delayed digital tax next month on tech giants such as Amazon, Google, and Apple, will likely complicate the task of finance minister Paschal Donohoe in retaining Ireland’s corporate tax firepower, a senior economist has said. 

UCC's Seamus Coffey, a former head of the Irish Fiscal Advisory Council, said the move could also open the threat of trade retaliation by the US if it feels France is targeting American companies.

Ireland has long fought to keep reform of the way multinationals are taxed around the world within an existing framework run by the Organisation for Economic and Cooperation and Development (OECD) and has long accepted that some sort of change is coming after many years when the State has hugely benefited from the US tech and pharma corporates, such as Apple and Pfizer, who have significant EU operations here. 

Mr Coffey said that the French move increases the challenge for Irish hopes that the largest economies would strike a new international agreement on multinational tax within the OECD orbit.         

For Ireland, corporation tax revenues are playing a starring role in bolstering Irish Government finances during the Covid-19 crisis. 

Corporation tax revenues are for the most part collected from a handful of multinationals who channel a large part of their worldwide revenues through Irish companies. 

Separately, France and Britain have long sought to impose a digital tax on tech giants, and the European Commission has repeatedly proposed some sort of EU-wide digital tax, in the face of the opposition from Ireland and other member states.  

It has emerged, however, that the French finance ministry has sent out notices to big tech companies liable for its digital service tax to pay the levy as planned in December, the ministry said on Wednesday.

France suspended collection of the tax, which will hit companies such as Facebook and Amazon, early this year while negotiations were underway at the OECD on an overhaul of the international tax rules.

The French finance ministry has long said it would collect the tax in December as planned if the talks proved unfruitful by then, which is what happened when the nearly 140 countries involved agreed last month to keep negotiating until mid-2021.

“Companies subject to the tax have received their notice to pay the 2020 instalment,” a French finance ministry official said.

France last year applied a 3% levy on revenue from digital services earned in France by companies with revenues of over €25m in France and €750m worldwide. 

The ministry had hoped to raise a relatively small amount of about €500m this year from the tax, but the 2021 budget bill puts the figure at €400m. 

Facebook’s stance is “is to ensure compliance with all tax laws in the jurisdictions where we operate”. 

Other tech companies have made similar statements. 

Paris has said it will withdraw the tax as soon as an OECD deal is reached to update the rules on cross-border taxation for the age of online commerce, where big internet companies can book profits in low-tax countries regardless of where their customers are. 

  • Addtional Reporting: Reuters

More in this section

Lunchtime News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up
Revoiced
Newsletter

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up