France is trying to squeeze more out of web businesses like EBay Inc., Amazon.com Inc. and Airbnb Inc.
Soaring online sales and the use of the Internet giants by smaller businessses as a marketplace for goods and services is prompting the French Senate to look for ways to collect more taxes from them and help Francois Hollande’s government narrow its budget gap.
French online sales may grow nearly 10 percent this year to 62 billion euros ($70 billion), according to the FEVAD, the country’s e-commerce business group. The Senate’s finance committee wants the state to get a bigger slice of that pie through value-added taxes, customs levies and a crackdown on companies using bases in fiscally favorable countries to do business in France.
“Technology and shopping habits are evolving at a crazy pace and tax laws must adapt,” Alberic de Montgolfier, France’s Senate Committee chairman who heads the special tax work group, said in an interview. “All vendors should be equal: those who sell in a physical store and those who do so in a digital one.”
The French effort is part of a global endeavor by countries from Australia to Germany to come to grips with the booming web-based shared economy and marketplaces not neatly framed by rules and regulations still largely based on bricks-and-mortar operations. Tax authorities are grappling with everything from figuring out how sales are calculated to tax evasion and fraud, as record numbers of consumers and businesses boost spending on the web.
Online sales to customers in Europe are expected to grow about 13 percent this year to 478 billion euros, with more than half in goods and the rest in services, according to a report released Tuesday by Brussels-based Ecommerce Europe, an industry association representing online retailers. Globally, online commerce will expand more than 20 percent this year to about to 1.76 trillion euros, it said.
The U.K., Germany and France represent 60 percent of Europe’s online retail operations. German sales are expected to grow 12 percent this year, while in the U.K. they’ll increase 13 percent, Ecommerce said. Cross-border purchases are expanding rapidly, it said.
“There is a tremendous change of scale,” said Pascal Saint-Amans, the top tax official at the Paris-based Organization for Economic Cooperation and Development. “It’s not just the size of the trade but also the nature of online business that modifies the notion of taxing,” He will outline in the fall the OECD plan to recast tax systems and adapt them to the global digital trade.
The EU Commission for its part will unveil on Wednesday an “action plan” for the 28 member states to align their corporate taxes as part of efforts to overhaul a long-stalled proposal for a “common consolidated corporate tax base.”
The plan targets global companies that optimize tax bills by basing regional headquarters in countries with low tax rates.
The French Senate group has been seeking allies in its endeavor, reaching out to the European Commission and to its German and Italian counterparts. The French plan, to be unveiled in September, targets both the shared economy and online marketplaces.
About 35 million people in France, more than half the population, shop online, according to FEVAD. Internet sales in France rose 14 percent in the first quarter from the same period last year, to 15.2 billion euros, says FEVAD, based on data from the seven most-used payment platforms, including Paypal Inc.
“If they find the philosopher’s stone, I want to see it!” Saint-Amans said. “Layers of complexity are piling up” in figuring out the tax base in the digital economy, he said.
Italy voted in a “Google tax” in 2013, but failed to apply it because of the complexity of auditing online companies. Australia and the U.K. are planning to establish a working group on ways to stop multinational companies diverting profits and avoiding taxes.
Companies including Apple Inc., Google Inc., Glencore Plc and Rio Tinto Group appeared at Australian hearings this month to determine whether multinationals pay their fair share of tax.
In France meanwhile, the seven-member group is reviewing tax services, and operations of Internet retailers like Amazon.com and EBay, payment systems like Paypal and Visa and shared economy companies like apartment rentals firm Airbnb, classified ads service Le Bon Coin or car-share site Drivy, for ways to more effectively tax the intangible economy.
“They want to clarify the rules: who is sharing or re-selling as an individual, who’s making a business of it, who should pay a tax on that,” Paulin Dementhon, chief executive officer of Drivy.com, France’s biggest online car-sharing and renting company, said in an interview. “It’s a positive move, but it will have to be done in a smart way or it will hurt the industry.”
The fastest-growing online sales are on made on so-called marketplaces provided by websites including EBay and Amazon. Thousands of third-party merchants give EBay and other online retailers a cut of each sale for using their platform. Amazon, Ebay and Paypal declined to comment on their tax situations.
In France such sales rose 66 percent in the first quarter according to Fevad. In 2014, market places sales are estimated to 2 billion euros out of 57 billion euros of Internet sales in France. The figure will soar this year, Fevad forecasts.
For the senators, the challenge is to come up with a new form of taxation for this new environment.
“Everything will be in the digital economy soon,” Saint-Amans said. “There is a need for a change of concept of the tax system. We will need to look at how states will exchange and collect data to move forward.”
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