France seems to be focused on implementing protectionist measures that would help to boost the domestic economy. According to the BBC, the French government is considering introducing a 1% tax on the sale of smartphones and tablets to help fund French film, music and images.
France faces a genuine problem of declining output. The nominal GDP has been able to grow by 5.35% over the past 5-years. Meanwhile, the real GDP has seen a 36% decline over the same period. The difference between real GDP and nominal GDP is that real GDP measures the changes in real output (changes in production of goods and services), while the nominal GDP measures the increases in consumption. The above figure clearly illustrates that France’s economy is struggling to improve its production of goods and services.
Therefore, it is highly likely that the protectionist measure for a 1% tax on web-capable devices will be passed. The reason is that the French government has no means of competing in the market. There are no major smartphone manufacturers in the French economy.
The government hopes to offset the losses in production by using the 86 million euros the tax would raise in a way that would support cultural industries like music, imagery, and video. Perhaps French movie studios will be producing higher quality content that could compete with the likes of The Walt Disney Company (NYSE:DIS), Time Warner Inc (NYSE:TWX), and Viacom, Inc. (NASDAQ:VIAB).
Quantifying the effect on multinational company’s
I suspect that the French government won’t be the only government to implement some protectionist measures. I anticipate the rest of the Eurozone to at some point activate a similar 1% tax in order to stimulate supply-side economics. After-all, these economies face a very real threat of declining output.
I assume that at some point, all of Europe will implement a 1% tax measure against smart phone and tablet devices. This should result in a 1% decline in total European sales revenue. Under that basis I make my calculated losses for Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and BlackBerry. Remember these are just estimates, not exact figures!