A fiscal measure that has been popularly referred to as Alphabet Inc (NASDAQ:GOOGL) ‘Google tax’ will not be implemented in France. This was after it was ruled against by the French Constitutional Council. According to Reuters, the fiscal measure had been designed with the intention of making it harder for multinationals to pay as little tax as possible in France.
Luring foreign investors and businesses
The ruling by France’s Constitutional Council comes amidst a government plan to increase the attractiveness of the country in the eyes of foreign firms following the British referendum that voted in favor of leaving the European Union.
‘Google tax’ had been targeted at the multinationals that use tax regimes of different countries in a bid to lower tax liabilities. It had already been included in the 2017 budget law of France though the government has since admitted its reservations over the plans.
France’s Constitutional Council also made the expansion of the planned financial transactions tax valid. This means that beginning 2018, intra-day transactions will have to pay the financial transactions tax. But depending on the outcome of the elections that are to be held in 2017, this might be challenged.
Taxing at source in one year’s time
The Constitutional Council also validated a plan by the government to have the French taxed at source beginning 2018. This will mean that income tax payments will be deducted by employers from the gross pay a year from now. Currently, it is upon employees to declare their income and then settle the tax bill individually.
The decision by France’s Constitutional Court comes a little more than a week since the passing of a new budget law that could impose severe penalties on large US internet firms such as Google, Uber, and Facebook Inc (NASDAQ:FB) for tax avoidance practices. It is understood that the measure will put a stop to ‘diverted profits’.
“A moral person domiciled or established outside of France is subject to income tax when a company or legal entity, whether established in France or not, conducts an activity that consists of the sale or supply of products or services,” states part of the measure.
In Thursday’s trading shares of Alphabet Inc fell by 0.21% to close the day at $802.88 a piece.