French President Macron refused to withdraw the tax on global tech firms despite the threat of US countermeasures.
Equalization Levy: India’s quest to tax global tech giants such as Google, Facebook, Twitter, Microsoft, WhatsApp, LinkedIn, and several other companies received a shot in the arm this week when French President Emmanuel Macron announced that he has reached an agreement with the US President Donald Trump to settle their differences. He also said that the tax will be withdrawn if a global agreement over the subject is reached. Macron’s statement made it clear that France will not withdraw the tax under pressure from the US. It is a major victory for the countries like India that have been working to evolve a global consensus to tax global tech giants despite threats of a tit-for-tat move by the US. Indian efforts are aimed at taxing those tech giants that have a significant economic presence in the country but pay negligible or no tax.
France last month imposed a tax on global tech companies at the rate of 3 percent, the tax has come to known as Google tax. The tax is expected to hit 30 global tech firms including Google, Facebook and Amazon and the French government hopes to earn 500 million euros from the tax. French tax is similar to an equalisation levy imposed by India in 2016 at the rate of 6%. This levy is applicable on the entities registered in the country if they avail advertising services of more than Rs one lakh in a year from global tech firms like Facebook, Twitter, Google, and LinkedIn.
“Some digital players pay very little tax. This is an injustice that destroys jobs, said Emmanuel Macron in a strongly worded statement following his meeting with US President Donald Trump who was in Biarritz to attend the meeting of G7 countries.
Emmanuel Macron’s views will strengthen the stand taken by India at G20 meeting in Japan in June this year. Finance minister Nirmala Sitharaman had urged the G20 nations to evolve a consensus over the issue of taxing digital companies.
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It is crucial for the country to sort out this issue as it is impacting a large number of start-ups and SME companies in the country. The country has more than 20,000 recognised start-ups and a large number of them are operating in the field of development of cutting edge technologies like machine learning, artificial intelligence and big data. It requires availing services of tech giants and their servers. However, it attracts the equalization levy at the rate of 6% but these start-ups and small and medium companies can’t claim input tax credit under the GST as often global tech giants generate invoices through their entities registered abroad.
These sectors have made several representations to the government asking it to force multi-national tech companies to invoice them through their India registered entities. They have also asked the government to impose a direct tax on these tech giants instead of imposing the equalization levy which is an indirect tax. Emmanuel Macron’s decision to retain 3% tax on digital companies despite the threat of US countermeasures comes as a shot in the arm for several other European and Asian countries to tackle the issue.