Google passes on the digital tax to its French customers

The American group has displeased advertisers by explaining that it would increase the prices of its advertisements by 2%.

source: image.cnbcfm

Taxed, Google taxes its customers... The American company sent, Wednesday March 3, an e-mail to its French customers to announce that the prices of its advertisements will increase by 2% from May 1.

The justification? Google is passing on downstream the digital tax of 3% of revenues voted by Paris in 2019 to compensate for the low amount of taxes paid in France by major online platforms. The group sent a similar message to its customers in Spain.

"We are very surprised by this decision and we regret it," said Jean-Luc Chetrit, CEO of Union des Marques, the association of French advertisers.

Google is a dominant platform, which has made large profits in 2020 [$40 billion, or about 33 billion euros] but is passing on to its customers a tax voted in the name of fairness. In principle, this deferral is debatable, but it is even more debatable now, given the context of the economic crisis. 

Google's decision is only half a surprise: the company had already announced price increases of 2% in the UK and 5% in Turkey and Austria in September 2020. Indeed, these countries have also passed national digital taxes.

Favorable to tax reform at the international level

At the time, Google had not taken the same decision in France, although it was a precursor on this issue.

The company considered that the situation had not "stabilized" there because the Ministry of Finance had suspended the collection of its levy to appease the United States during international negotiations on digital taxation within the Organisation for Economic Co-operation and Development (OECD).

In the meantime, France has resumed collection of its tax, due to the blocking of negotiations by the Trump administration, hence Google's decision for France.

Before the world leader in online search, Amazon was the first, as early as August 2019, to defer the French tax on companies selling their products on its platform. This choice had annoyed the teams of the Minister of the Economy, Bruno Le Maire, who saw it as an act of distrust.

Then, in September 2020, Apple in turn informed French developers that the digital tax would be included in the calculation of their revenues generated in the App Store, the iPhone application store. The manufacturer had taken similar measures in the United Kingdom and Turkey.

Faced with the controversy, Google, like other digital giants, repeats that it is opposed to "discriminatory" national taxes but in favor of tax reform at the international level, as its public affairs manager Karan Bhatia pointed out in a blog post published on February 25.

The administration of the new U.S. President Joe Biden has just removed an obstacle to the resumption of discussions within the OECD.

The changes could push digital companies like Google to stop paying 80% of its corporate tax in the United States as it does today, Bhatia acknowledges, but warns countries like France: "Foreign companies exporting to the United States will pay more to the U.S. Treasury. »