The Framework

France has implemented one of the most expansive and aggressive digital services tax (DST) policies in Europe in July 2019, imposing a 3 percent tax on revenues derived from digital interface services, targeted advertising, and user data sales.[1] The tax applies to companies with global revenues exceeding €750 million and French revenues above €25 million. The French National Assembly has adopted amendment I-735 to increase this rate to 5 percent starting January 2025, pending final parliamentary approval that was scheduled for December 12, 2024.^[2] This 67 percent rate increase would generate an additional €500 million annually, extracted primarily from U.S. technology companies including Google, Amazon, Meta, Apple, and Microsoft. Unlike narrower DSTs adopted by other countries, France’s approach captures a broad range of digital activities and includes additional levies, such as a 1.2 percent tax on streaming music and extensive value-added tax (VAT) requirements for digital service providers. This multi-layered taxation system specifically targets the operational models of American digital platforms while exempting smaller European competitors.

Implications for U.S. Technology Companies

Increasing the DST from 3 percent to 5 percent doubles down on a fundamentally flawed approach—taxing revenue instead of profit means U.S. companies pay even when they lose money. A company with 3 percent profit margins would see their entire profit wiped out by a 3 percent revenue tax, and now France wants to take 5 percent. This discriminatory tax structure ensures that primarily American firms pay while smaller French and European competitors stay below the €750 million threshold. The revenue-based model punishes growth and investment, as companies expanding into new markets or developing new technologies must pay the full tax rate on every euro of revenue, regardless of whether they’re profitable in France.

France’s willingness to increase an already discriminatory tax by 67 percent sends a clear signal to other countries: targeting U.S. tech companies for special taxation faces no meaningful consequences. If France succeeds with 5 percent, why wouldn’t Italy try 6 percent or Spain push for 7 percent? Each country’s unique digital tax creates a compliance nightmare where U.S. companies must track different thresholds, rates, and definitions across Europe. The June 2025 constitutional challenge acknowledges what’s obvious—this tax discriminates against foreign companies and treats digital services differently from traditional businesses. Yet while French courts deliberate, U.S. companies must pay an extra €500 million annually, money that would otherwise fund innovation and job creation.

Endnotes