updated 12:20 pm EDT, Mon May 13, 2013
May heighten tensions over tax avoidance in EU countries
French President Francoise Hollande is considering a new tax on tech products, the money from which would fund cultural projects. The move, which would be decided this summer and has been described as "minimal and widely distributed," may increase tensions between tech companies and the government of France -- along with other EU countries, many of which have complained that firms such as Apple and Google are gaming the system in order to avoid paying taxes that would normally be due.
The move comes on the heels of the French government's blocking of an attempt by Yahoo to purchase French-owned video site Dailymotion. The country has also tangled with Google over a ultimately-failed plan to force the search giant to pay for links to French newspapers. The government eventually settled with Google in exchange for a commitment of 60 million Euros ($78 million) to fund more newspaper production in France.
The proposed tax, reports Reuters, would mirror levies already paid by TV owners, broadcasters and Internet service providers to fund artistic projects in France. In addition to a long heritage of cultural support, France has argued that in addition to the arts' inherent importance to the overall quality of life, the very tablets, phones, notebooks and other gadgets the electronics industry creates would have much less success without their leveraging of creative, arts and cultural content.
Currently, companies such as Google, Amazon, Microsoft and Apple are exempt from paying into the tax. In the UK and other countries, Apple among other tech companies has been criticized for taking advantages of loopholes in order to avoid paying normal tax rates. For example, Apple located its UK headquarters in Ireland rather than in London -- where it does billions annually in sales -- due to Ireland having the lowest corporate tax rate of the UK countries. Apple ended up not paying any UK taxes last year.
Apple saves millions in taxes by claiming that all sales go through the Irish office rather than paying the tax rate in each country in which they operate. Likewise, the company's European headquarters is in Luxembourg for tax purposes. While entirely legal, the company and other tech giants have been accused of short-changing the economy of the countries in which they do most of their business. Apple keeps nearly $100 billion of its cash hoard offshore in order to avoid a corporate tax charge on bringing those foreign profits into the US.
France's proposal of charging new levies on tech products will mostly hurt consumers, argue the companies, and contribute to a general anti-business stigma that has been attached to the country. The government is also working to exclude French cultural products (art, music and so on) from free trade rules in a forthcoming agreement between the US and the EU. The deal, if concluded successfully, would create the largest free-trade bloc on Earth. President Obama is visiting the country in June to launch talks on the free-trade deal.