The taxman misses. French lawmakers wanted to tax digital giants like Amazon, but their tax plan, write Elke Asen and Daniel Bunn, hit the wrong target:
France recently introduced a 3 percent digital services tax on revenues generated from sales of user data, digital advertisements, and online platforms run by large companies. Following the enactment of the tax, Amazon France has now decided that it will increase prices faced by vendors using its online marketplace. Starting October 1, 2019, Amazon will increase its commission rate on businesses selling on Amazon’s French marketplace by 3 percent.
For instance, a vendor selling a watch worth €100 on Amazon’s online platform in France currently faces a 15 percent, or €15.00, commission rate. This 15 percent sales charge will increase by 3 percent to 15.45 percent, resulting in a new sales charge of €15.45 on the €100 watch.
Even though the French tax is targeted at Amazon and other large digital firms, in this case it will be Amazon’s French vendors who will bear the burden of the tax.
This increase in the commission rates comes as little surprise. Because the tax is levied on the revenues generated through the marketplace, it should have effects similar to a sales tax or value-added tax (VAT). Economic research shows that these types of taxes are generally passed on to consumers. As Amazon’s marketplace does not sell directly to consumers but instead operates as an intermediary, that means passing the tax on to the vendors using its marketplace.
The online vendors may, in turn, pass at least part of the increased commission rates on to consumers through higher prices. Aneconomic impact assessment of the French digital services tax shows that about 55 percent of the total tax burden will be passed on to consumers, 40 percent to online vendors, and only 5 percent borne by the digital companies targeted by the new tax.
[Elke Asen and Daniel Bunn, “Amazon Passes France’s Digital Services Tax on to Vendors,” Tax Foundation, August 6]