The French constitutional council has ruled against rules intended to stop potential tax evasion in France. It is understood that the move is political as France tries to woo business that is currently operating in Britain to move to France once Britain leaves the EU.
The tax was meant to stop companies using different countries tax systems to their benefit. It was meant to be passed in to law in the 2017 budget but this has now been put on ice. The plan to tax so called “Diverted profits” up to 60% was seen as somewhat draconian by modern standards.
Google has come under scrutiny worldwide, along with a host of other large companies for not being transparent in their dealings, and essentially abusing the differences in global tax rates. But many in France have rallied against the measures, stating that they make French business dealings hard on competitiveness.
Google isn’t the only company in hot water for claims of tax misdemeanours Facebook is yet another giant tech company that is often fingered for its own tax avoidance schemes. It is hoped that these type of laws that stop taxable money leaving the country could add to the coffers in France. As there’s currently a socialist government there’s a large taste for these type of taxes. Whether this will change if, as expected, France goes for a more right wing candidate in unknown. But is certainly less likely under Conservative leadership.
This follows on from another significant case in France, as the government has asked Apple to cough up 400 million euros extra in tax due to the company being accused of aggressively avoiding taxes in the country.
The changes in France are likely to be the start of many other countries also turning their attention to the activities of big business. Many of these companies have purposefully complex structures that allow them to be extremely tax efficient. It’s this efficiency that is the problem, as some will say that they’re actually actively avoiding tax. Many countries will look on, potentially rubbing their hands together at potential windfalls coming their way if they, like France, also turn their might towards collecting these taxes. Though it is likely that there will be at least one country that will be happy to house these types of company, as has happened in the past. It will be interesting to see how the might of government fares against the intelligence of business.
Joseph is a 34 year old freelance writer from London. He has a wide interest in politics and specialises in the subject. He's also a blog writer in his spare time.