France has become the first EU state to spearhead the imposition of additional taxes on Silicon Valley giants and with good reason, tax and cyber experts told Sputnik.
"US companies are the super-champions of web services provided to EU citizens", said Damien Moras, Founder of VAT4U, Europe's leading online VAT recovery solution. "However, according to the European Commission, their average tax rate of these big firms in the EU is between 8.5 percent and 10.1 percent compared to 20.9 percent and 23.2 percent for European companies in general. This is an average of nearly 14 points less. This situation is rightfully a very hard pill for many EU citizens to swallow".
Deep-Rooted Animosity Between the EU and Silicon Valley
The EU has repeatedly tried to impose restrictions on US-based companies. In January, France fined Google Inc €50 million ($56.2 million) for violations of the EU General Data Protection Regulation (GDPR).
On 6 March, the French government introduced a 3-percent digital tax targeting internet flagships like Google, Facebook and Amazon. According to France's Finance Minister Bruno Le Maire, the tax will bring 500 million euros ($565 million) per year to the country's budget. A similar initiative by the EU failed in 2018 amid fears from some bloc members that the US Organization for Economic Cooperation and Development (OECD) would retaliate.
Commenting on the issue, Moras noted that "first of all, regarding GDPR, it is important to highlight that ever since it came into effect, it has affected all companies — irrespective of size, industry or scale".
As for Paris' 3-percent digital tax, he opined that although it was aimed at compensating for the inequality of tax treatment, the benefit of the initiative was unlikely to outweigh "the negative echo that it could have across the Atlantic". "The US tends to be sensitive and reactive to any tax initiative that is driven against its firms", he warned.
"Therefore, introducing this tax might be very popular since it inspires justice but also seems to be more a symbol than a solution", the economist suggested.
Ebong Eka, a certified public accountant, international bestselling author and tax Expert based in the Washington, DC area, echoed Moras: "The EU and France's goal to introduce a digital tax on US tech companies could strain trade relations [between the US and the EU]".
He suggested that following the Trump Tax Cuts and Jobs Act of 2017 (TCJA), "that reduced the corporate tax rate to 21 percent [from 39 percent], tech companies may now reconsider how they navigate the EU landscape", as the average EU corporate tax rate amounts to around 22.5 percent.
Rich Tehrani, a futurist and corporate advisor on cybersecurity, communications, blockchain and Io, holds a different opinion.
Having said that "the animosity between the EU and Silicon Valley" was deeply rooted, the cyber expert rejected the assumption that the bloc's initiatives would affect US-EU trade relations. According to Tehrani the reason is that the Silicon Valley and the White House are not "very close" due to Big Tech's purported "censorship of conservative viewpoints".
"The US in general has also become concerned about these giant tech companies being tech monopolies", he added.
Why Did France, EU Decide to Go After GAFA?
When asked why the EU lawmakers had decided to go after the Silicon Valley giants amid the euro turbulence, migration crisis and Brexit problems, Ebong Eka opined that it was all about the money in the first place.
"The answer is simple — money and tax revenue", he said. "Many of these EU nations have focused on social programs in recent years that they now have to pay for in the present time".
According to Rich Tehrani the issue is far more sensitive for EU member states: "They have always seen US tech companies as a threat to their culture", the cybersecurity expert presumed. "You may recall in 2003 that France even banned the word e-mail because it was too 'English' and instead decided to use courriel".
"Interestingly, in a way, France invented the modern Internet with its Minitel service. They have to be mighty annoyed that they never were able to leverage this service for global tech dominance. They shut it down in 2011", Tehrani recalled admitting that "competing with Big Tech companies these days is becoming increasingly difficult".
For his part, Damien Moras suggested that the bloc's decision hid Europe's failure to tackle a series of challenges.
First, according to the economist, the EU has failed to build "a strong landscape in the e-economy".
"More than complaining about the fact that the GAFA [Google, Amazon, Facebook, and Apple] are not paying their fair share in taxes, we should ask ourselves why the EU, the first global economy, is not able to create European players with an ambition comparable to Google or Facebook?" Moras asked.
The second flaw is the union's inability to maintain "tax harmonization for a common future".
"If France is willing to put in place this tax on its own, the reason is that other EU member states do not want to put it in place at an EU level", he elaborated. "The tax dumping promoted by some member states and this lack of tax harmonization illustrates the limits of our current system to take unified decisions for building the foundations of a long-term relationship".
Will the EU Push the Matter Through?
Neither one of the three experts doubted that the French tax initiative would be adopted.
"Knowing that the government has a clear majority in the French Assembly, and that that the population is in favour of this measure, I do not see why it could, and would, not be adopted", Moras said.
"They could but I doubt they will have a legal foothold regarding restrictions on speech", Eka remarked.
According to the scholars, if the specific regulations are implemented by France and the bloc in general the Big Tech will be forced to abide by them.
"If a specific tax law is passed to target these tech companies, it will be difficult to see how they avoid paying", Tehrani opined. "If they do find a way around them, this would likely anger lawmakers who could make things even tougher for them".
Still, according to Moras, at this stage, one may expect that the Silicon Valley giants will attempt "to lobby and strongarm the authorities into not going ahead with implementing such regulations".
"The real question, in this situation, is whether European authorities will be pressured into not moving forward. Time will tell", he concluded.
The views and opinions expressed by the speakers do not necessarily reflect those of Sputnik.