Amazon to pass cost of France's new digital tax onto French customers

US online giant, Amazon, has found a solution to cope with France's new digital Gafa tax. It plans to pass on the costs of the tax to third party retailers who use its services.

From October 1st, online retailer Amazon will increase the commission it charges the French businesses that use its Marketplace platform for finding customers,  by three percent, rather than taking the hit itself

That's the same amount as the new Gafa tax - so called because it applies to Google, Amazon, Facebook and Apple - which France approved three weeks ago.

Applied retroactively from 1 January 1st, it's designed to force big technology firms to pay more in the markets where they make their money and sets a three percent levy on the profits from providing online sales for third-party retailers, as well as on digital advertising and the sale of private data.

It's gone down like a lead ballon in the US with president Donald Trump  threatening to retaliate by taxing French wine imports.

A tax too far?
Amazon jusitified its retaliatory measures as follows: "As we operate in the very competitive and low-margin retailing sector, and invest massively in creating new tools and services for our clients and vendor partners, we cannot withstand an additional tax," it told AFP in a statement.

This is despite recording a €2.25 billion profit last year, including more than €25 million here in France. Its annual turnover was more than €63 billion.

It remains to be seen whether French consumers will end up footing the bill.

One third party retailer, Rakuten France (formerly PriceMinister) said it had no intention of passing on the costs of the tax to its own customers, at least in 2019.

But for next year its chief executive said it would wait and see what impact Amazon's three percent increase in commission would have on the company.

Snowball effect
French economy minister, Bruno Lemaire, said there is nothing obliging Amazon to pass on the costs of the Gafa tax to small and medium-sized enterprises using its services, adding  "the principle isn't enshrined anywhere in the law creating the tax".

France says  it had no choice but to levy the Gafa tax because it failed to secure an EU accord on how to plug what it considers a fiscal loophole whereby American internet heavyweights route profits made within the EU  to member states with low corporation tax such as Ireland or Luxembourg.

According to the French economy ministry, around 30 large companies would be required to pay the tax, notably those with global revenues of at least €750 million and revenues of at least €25 million in France alone. 

The French government said it hopes to secure an international agreement that would include all OECD countries by the end of 2020.

But for the moment it's taken unilateral action and Amazon says, not unreasonably, that the Gafa tax could put smaller French firms at a competitive disadvantage to their peers in other countries. 

The big worry now is that there could be a snowball effect. If other online giants such as Google copy Amazon and apply commission on French companies using their services, that could have a big impact on French businesses, and consumers.