Google Inc (GOOG), Apple Inc. (AAPL): Higher Digital Tax in France?

In a report on Bloomberg TV yesterday, Matt Miller discussed a rather interesting issue regarding Google Inc (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and other digital companies like Amazon.com, Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB). In the network’s “Global Outlook” program, Miller discussed how “France is saying that it’s going to look into changing its laws next year to try and block companies like Google and Apple from putting earnings in different European countries to avoid taxes that they would have gotten levied on in France.”

The Next Battleground for Apple Inc. (AAPL) and Google Inc (GOOG)?

Originally appearing on a lengthier print report on Bloomberg itself, Philippe Marini, a senator who heads France’s Senate Finance Committee, paraphrastically maintains that “[t]axing the digital sector like other industries could generate more than 500 million euros ($648 million) for the French state annually, enabling it to narrow its budget deficit.”

Now, it’s obvious that France – like the rest of the Eurozone – is being fiscally squeezed, but one can make the case that these pressures are a result of its own indebtedness and willingness to participate the European Economic Area – a classic single market system – not because of malice from Google Inc (NASDAQ:GOOG) or Apple Inc. (NASDAQ:AAPL). Consider the following: according to the IMF’s latest data, General government gross debt in France comprises just over 86% of its GDP, seventh worst in Europe. In fact, France is more indebted than nations whom many would consider to be ‘peers’ more or less, like the UK (82.5%), Germany (81.5%), and even Spain (68.5%).

Even more compelling, it can be argued that “the French don’t understand the very tax system they’ve spent decades building,” as Forbes‘s Tim Worstall discusses here. Worstall says that the methods used by companies like Google and Apple Inc. (NASDAQ:AAPL) are “not loopholes: they are the point and purpose of the system [...] the old national boundaries aren’t supposed to be important any more,” adding that the EU’s current tax structure gives companies “every right, indeed the system is set up to persuade you to do this, to sell from only one European base into all EU countries.”

One particularly important point that Worstall makes is about France’s 19.6% value-added tax, which, “on digital goods is paid at point of dispatch, not delivery,” meaning that the likes of AAPL, GOOG, FB, AMZN, and any other techie can set up their headquarters in a more tax-friendly country like Ireland, for example. Therefore, Apple Inc. (NASDAQ:AAPL) and the rest of the crew are well within the realm of legality to continue to use this system to their advantage; to expect corporations to not be profit-maximizers defies basic Economics 101.

What are your thoughts on this situation? Should digital VATs be levied in a similar manner as other VATs, and more importantly, should tech’s major players take the brunt of the French government’s frustrations?

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

The 20 Biggest Contracts in MLB History

The 7 Worst Blown Calls in Sports History

7 Free Ways to Advertise Your Business Online

The 18 Best R&B Songs of the 90’s

The 10 Most Dangerous States to be a Cop

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!