II. WHAT ARE THE CONCRETE ASPECTS FOR A NEUTRAL AND FAIR DIGITAL ECONOMY TAXATION?
As the law currently stands, any measure to try to unilaterally relocate the revenues declared in another State in France would go against international undertakings.
Failing this, we must re-establish the principle in the short and medium term of the fairness of taxation treatment for existing taxes as well as for the dematerialized flows of added value without threatening the free services offered to net surfers and without unilaterally creating additional taxation pressure exclusively on French SMEs. This new approach must be very clearly expressed to prevent the large Internet groups using their considerable lobbying resources to repeat their victimization message which was very successful in the media. It must be reiterated that the neutrality of the net should not result in creating tax evasion zones for the large groups who claim all the virtues (economic growth, freedom of expression etc) but at the same time whose behavior is purely intended for tax avoidance purposes. This is the reason why the neutrality of the net implies taxation fairness.
A. FACTOR IN FAVOR OF THE LEGISLATOR'S WORK: E-TAXATION IS PART OF THE CURRENT ECONOMIC, FISCAL AND POLITICAL CLIMATE
1. Economically: e-commerce is a dynamic taxable income base
Since the Finance Committee's roundtable meeting on April 7, 2010 on the impact of the growth of e-commerce on the State's finances, all recent studies confirm the very fast growth in this sector which is creating new and dynamic taxable income base.
The main points of the Google report ordered from McKinsey and the impact of Internet on the French economy highlighted that:
- The Internet has contributed to a quarter of French economic growth and the creation of 700,000 jobs in 15 years,
- In 2015 the Digital economy will account for 5.5% of GDP i.e. €129 billion and will have created 450,000 new jobs in five years.
In addition the eBay, Amazon and latterly the Facebook groups point to their beneficial impact on jobs and the economy.
However even though the concrete impact of the digital economy remains a moot point for economists on the precise issue of the number of direct or indirect jobs created by the digital economy, the digital economy in particular e-commerce, now already constitutes a dynamic taxable base and a pool for future growth, with the major part escaping corporation tax.
The CNNum considers that « the revenues generated by four of these players (Google, iTunes, Amazon, and Facebook) vary between €2.5 and 3 billion euros in France, paying on average €4 million per year corporation tax, although if the French tax regime were applied they could owe around €500 million ».
2. Taxation: how to tax dematerialized e-commerce?
There are two topics which illustrate the difficulties States encounter in applying and collecting the tax of dematerialized sales over the Internet.
- In Europe , the main challenge concerns the flight of taxable income linked to corporation tax . The international taxation rules do not enable the revenues from turnover realized in France to be satisfactorily collected. In addition the part connected to the VAT on the sale of dematerialized property or services to consumers in France (e.g. iTunes, Skype) must not be considered solved. In effect, up until 2015, the company invoices the end consumer VAT from the head office. After 2015, the company must invoice the VAT for the place of consumption and it is only after a transition phase i.e. from 2019 that the company will repay it directly to the State where the consumer lives. This date is far too far away and requires renegotiation at the European level.
- In the United States, Amazon is in conflict with several states about the non-collection of «sales tax» and the failure to repay it to the competent tax authorities. This is a tax on sales applied in the majority of American States and Canada. This indirect taxation is levied at the point-of-sale and paid to the state by the trader. It is a tax which is only paid by the consumer. However the application of this tax on distance sales poses the problem of its collection. Outside France and Europe, tax avoidance by the large Internet sites is affecting all the world's regions including the countries were e-commerce originated. It should be remembered that in the tax avoidance circuits («double Irish» and «Dutch sandwich») Google's and Apple's profits are piling up in tax havens and can only be repatriated to the United States under the cover of taxation amnesties 66 ( * ) .
3. Politically: the taxation of Internet giants has become an item in French political programs
The political programs of Nicolas Sarkozy (tax on online advertising and changing the rules for taxing profits) and François Hollande (reviving international negotiations on the taxation base for corporation tax), both tackle the problem of the taxation of international Internet groups in order to optimize taxation revenue.
* 66 « Google 2,4 % rate shows how $60 billion lost to tax loopholes » (Bloomberg - by Jesse Drucker - October 21, 2010);
« Amazon: £7 billion sales, no UK corporation tax » (The Guardian - by Ian Griffiths - April 4, 2012);
« How Apple sidesteps billions in taxes » (The New-York Times - by Charles Duhigg and David Kocieniewski - April 28, 2012);
« Apple, sa montagne de cash et la peur de la banalisation » (Les Echos - by Romain Gueugneau - April 2, 2012).