France's digital tax: What is behind it?
Anyone sending data to French internet connections will have to pay in the future. The state is set to collect 5.5 cents per gigabyte. The National Assembly in Paris has decided this. However, it will still take some time before this comes into effect.
France wants to expand its «toll for the digital highway». Companies whose services generate particularly high traffic are to pay levies to the French state for this – namely 5.5 cents per gigabyte. This would primarily affect streaming providers like Netflix, but also gaming platforms such as Steam or those of the Playstation, Xbox, or Switch. Big Tech companies like Meta, Google, or Amazon are also responsible for a particularly large amount of internet traffic. However, there is a cap: the levy may not exceed 15 percent of the companies' revenue in France or two percent of their global revenue – whichever amount is lower. The motion was submitted to the French National Assembly by MP Laurent Lhardit of the Socialist Party. He expects tax revenues of around 10 billion euros per year.
What is the idea behind it?
Since 2019, France has already had the «taxe sur les services numériques», or digital tax. So far, this has affected the advertising and intermediary services of large digital corporations. If such a company generates more than 25 million euros in revenue in France, it must pay three percent of that to the French state. Last year, this already brought the French treasury the equivalent of 875 million US dollars.
Source: ampmetropole
Lhardit's amendment aims to hold other companies accountable that generate high revenue in France with services but pay their taxes in countries that levy lower rates – for example, in Ireland. In addition to the companies previously affected, businesses that deliver large volumes of data are now also to be made to pay. Lhardit justified this by stating that digital services have hardly been taxed until now, whereas physical ones have. Furthermore, the levy is intended to be an incentive for companies to compress their data more effectively – less traffic also protects the environment.
The original form of the digital tax was intended as a transitional solution until an international solution via the OECD (Organisation for Economic Co-operation and Development) takes effect. There was already a debate last year about raising the rate from three to six percent. However, the Senate rejected this.
How exactly does it work?
French internet providers measure every quarter which data volumes from which sender arrive at their customers. They report these figures in a summarized and anonymized form to the tax authority, which then collects the money from the providers. The entire procedure is monitored by the regulatory authority Arcep. This is intended to ensure that the tax is paid correctly without violating data protection. The whole thing is meant to adhere to the polluter-pays principle – as this prevents corporations from generating a large portion of data traffic on infrastructure that is financed by customers and taxpayers.
Critics argue that half of this tax would not hit Big Tech, but rather small companies that offer popular software. For example, the French developer VideoLAN, whose popular VLC player would suddenly incur additional costs of one million euros per year according to their own calculations. And this, even though the VLC player is free. Furthermore, according to critics, it is likely that tech corporations would simply pass the additional costs on to end customers.
What happens next?
After the idea initially fell on deaf ears in the Finance Committee, it was adopted by the National Assembly. Curiously, however, only 35 people were in the plenary hall out of 577 MPs. The result was 11 to 10 votes, with 14 abstentions. Now the motion must go through a second reading in the National Assembly, followed by deliberation in the Senate. Since a conservative majority rules there, failure in the next vote is considered likely – especially since the French executive also rejects the initiative.
I've been tinkering with digital networks ever since I found out how to activate both telephone channels on the ISDN card for greater bandwidth. As for the analogue variety, I've been doing that since I learned to talk. Though Winterthur is my adoptive home city, my heart still bleeds red and blue.
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