Macron gives EU tech tax a political push
STRASBOURG — Emmanuel Macron is gunning to turn his crusade against Big Tech into a broad political rallying cry ahead of next years European Parliament election.
Six months after the Facebook/Cambridge Analytica scandal prompted outrage across the European Union, the French presidents finance minister pressed EU party leaders Tuesday to act on concerns about technology companies tax practices and perceived market dominance. The French governments hope is that those leaders will put pressure on heads of government back home.
To push his plans for a so-called digital tax on the revenue of companies like Google and Facebook, Finance Minister Bruno Le Maire came to the European Parliament in Strasbourg equipped with a three-page fact sheet on the proposal and a Twitter hashtag (#wepayyoupay) designed to win over politicians and voters.
Le Maires pitch to the Parliament is the latest step in a campaign to build broad support for a measure that Macrons government regards as a vote-winner — but which some EU governments are reluctant to support, while tech companies have decried the plan as an unfair cash grab that would stifle innovation.
The French-led push fits into broader European efforts to rein in Silicon Valley companies, ranging from a $5 billion antitrust fine against Google to ongoing investigations into Facebooks data practices. The large tech firms have so far responded by ramping up their lobbying efforts in the European capital, while U.S. Treasury Secretary Steven Mnuchin has warned the Europeans against jeopardizing tech investment — although so far Washington has stopped short of bringing the digital tax issue into its argument with Brussels over trade.
Tech firms opposition to the tax plan is due mainly to its long-term implications rather than any immediate financial impact.
“Im calling on MEPs [members of European Parliament] and citizens to rally around the idea within 60 days so that EU finance ministers and later heads of state will adopt the proposal and re-establish fiscal justice in Europe,” Le Maire said, a day before Apple CEO Tim Cook was due to address a privacy conference in Brussels.
Le Maire added: “Today, the fiscal injustice is unacceptable.”
The tax plan, part of Macrons presidential campaign platform last year, has so far mainly been the subject of high-level diplomatic campaigning. Now France is trying to pick up the pace and win support from all 28 European capitals to get a law written into EU statute books by the end of the year.
While Paris claims to have the backing of 19 countries including the United Kingdom — whose chancellor, Philip Hammond, has pledged to “go it alone” on such a tax — its far from garnering the unanimous support needed for the measure to pass. A group of countries led by Ireland and including Estonia, Sweden and the Czech Republic remains strongly opposed.
French Economy Minister Bruno Le Maire | Frederick Florin/AFP via Getty Images
Thats where Le Maires trip to Strasbourg comes in: to convince political group chiefs and other members of the Parliament to lobby leaders in their home countries in favor of the turnover tax.
“The political approach is one we believe can go around some of the countries reluctance. These leaders can send a message back to their capitals,” said a French official.
Le Maires listeners were fully aware of the fact that Macron is working to grab a big chunk of seats in the next Parliament as part of a broad alliance of liberal parties.
The subtext to his message: Dont put yourselves on the wrong side of public opinion on this issue. After a day of meetings, even Gilles Lebreton, a member of Marine Le Pens National Rally, which usually opposes Macron, said he is “in favor of the digital tax.”
A pinch, with a long sting
In the wake of a $5 billion fine against Google, a €13 billion ($14.5 billion) tax recovery order against Apple and a slew of investigations against Facebook, Silicon Valley sees the digital tax as yet another front in the European Unions assault on its technological dominance and market power around the world.
DigitalEurope, a group representing the interests of big U.S. tech firms, wrote an open letter to the Austrian presidency of the Council of the European Union last week, urging them to reject the tax proposal, which it said would kill off innovation and investment in the EU.
Europes zeal in going after Big Tech on everything from privacy to copyright law has set the stage for a never-ending lobbying war between Big Techs proxies in EU capitals and central governments, many of which are much more immune to the nagging than Washington. In the latest sign of technology companies efforts to get to grips with Europes regulatory environment, Facebook last week announced it had hired British ex-Deputy Prime Minister Nick Clegg — also a former member of the European Parliament — as its head of global policy and communications.
Nick Clegg, former deputy prime minister of the U.K. | Matt Cardy/Getty Images
Tech firms opposition to the tax plan is due mainly to its long-term implications rather than any immediate financial impact. Under the current proposal, which was put forward by the European Commission for consideration by EU states by year-end, companies with substantial digital operations in the EU — those generating more than €750 million in annual revenue — would be subject to the new tax. The Commission has suggested a tax of 3 percent on revenues would raise some €5 billion a year.
Not all digital companies would be affected: According to French finance ministry officials, the plan is to focus on those that make money from collecting and deploying masses of personal data.
Proceeds from the tax would be distributed proportionally across EU member countries, according to the amount of revenue generated in each country. Spread across Facebook, Google, Amazon and a few other major firms, a €5 billion financial hit would not be an existential problem, considering that Facebook alone, for example, generated $40.7 billion of revenue in 2017. No large tech firm would plausibly be led to abandon the European Union as a result of such a tax, French officials argue.
“The United States is not going to abandon Europe commercially over a tax that would bring in €5 billion per year” — Anonymous French official
The problem for tech companies has more to do with the fact that France, and many EU allies, want to enshrine the idea of taxing value added from the collection and deployment of personal data for advertising — in other words, the engine at the core of Facebook, Google, Twitter and, increasingly, Amazons wildly successful business models. A European tax on data could prompt other countries to impose similar measures — just as Japan, South Korea, South Africa and a slew of other countries have imposed their own variations of Europes far-reaching data privacy rules.
Perhaps even more worryingly for companies, an EU move to tax revenues could set the ball rolling on a much broader reappraisal of corporate taxing practices worldwide — away from taxing profits, toward taxing revenue in the place where its generated.
Squaring the Irish circle
Skeptics argue that the digital tax proposal has little chance of seeing the light of day. Similar initiatives like a tax on financial transactions were never applied save in a few countries, defeating their purpose. Unanimous approval is a high bar to clear and Dublin, in particular, looks unlikely to back a tax that targets firms whose investments make up a large share of its gross domestic product.
Macrons troops insist this proposal is different, not least because of the groundswell of European frustration with U.S. tech firms in the wake of the Cambridge Analytica scandal, which affected 2.7 million Europeans. According to a survey conducted by Harris Interactive across six EU countries in September, 61 percent of respondents agree with the statement that Google, Apple, Facebook and Amazon are bad for democracy, and 67 percent agree with the statement that they are more powerful than the European Union. Politicians ignore such feelings at their own risk.
German Chancellor Angela Merkels party is on the fence about the digital tax | Sean Gallup/Getty Images
But the French government still has some tough nuts to crack. Most notably, German Chancellor Angela Merkels Christian Democrats are on the fence. While Berlin has never overtly broken with France over the digital tax, German industry leaders have voiced worries about potential backlash from the United States if it were ever to be imposed, and also about the prospect of having to pay taxes for data sold between various global subsidiaries of German businesses.
To all such concerns, the French are trying to provide reassurance. “The United States is not going to abandon Europe commercially over a tax that would bring in €5 billion per year,” said a French official who spoke on condition of anonymity to discuss diplomatic matters. “We understand the concerns, but this is a market of more than 400 million consumers. Theres no way around it.”
As to fears of German industrial data being taxed, the official continued: “What we are aiming for is a tax that will cover value created thanks to personal data of EU citizens and used for advertising purposes, not industrial data … German carmakers dont have to be worried.”