Cécile Philippe // 5 November 2025

France has a habit of playing with fire when it comes to taxation, and the backlash is usually delayed. For decades, the use of production taxation, which duplicates traditional taxation, has undermined French competitiveness. This has had a knock-on effect on growth and public finances. However, awareness that this tax mechanism has been working against production has been very slow to develop.

On the contrary, there are areas, such as international taxation, where the backlash has been swift. One would expect our national representatives to approach taxation issues with forethought, but this is not the case, as illustrated by the proposal to double the Digital Services Tax (DST).

In recent days, parliamentarians from all sides have tabled amendments aimed at increasing the so-called GAFAM tax (a DST on large technology companies, particularly Google, Apple, Facebook, Amazon, and Microsoft). This tax, which was introduced in 2019, is a thorn in the side of the US president, Donald Trump. The most ambitious proposal came from La France Insoumise , with a suggestion to raise the DST rate from 3% to 15%. Elected representatives close to the government, who were at one point tempted to increase the tax fivefold, voted to double the DST from 3% to 6%.

According to them, the American digital giants would contribute £1.5 billion in 2026 – instead of the £750 million in 2024 – and this would help France attain digital sovereignty. These two claims should be viewed with caution.

Firstly, it is both an economic and a political mistake to say that this tax will be paid by foreign players. From an economic point of view, the impact of taxation trickles down from the strong to the weak. GAFAM companies are virtually untouchable, and they will pass on the DST to French players – whether businesses or consumers – who will have to pay more for their services. Ultimately, therefore, it is the French who will bear the brunt of this tax.

From a political standpoint, claiming that this tax will be borne by the American technological giants is a risky proposition. Upon his return to power, President Trump decreed retaliatory measures against countries that tax American companies. It is likely that the United States will respond by targeting our export companies, particularly those in the wine, spirits, and luxury goods sectors. And once again, it will be French players who will be penalised. Doubling the GAFAM tax risks being a very bad deal for our economy and public finances.

Finally, claiming that this taxation will contribute to France’s digital sovereignty is denial. If France, like Europe, is lagging behind in digital technology, this is due to a structural shortcoming. Unlike the United States, we do not have an innovation ecosystem that allows us to finance start-ups and enable their growth on an industrial scale (with the equivalent of a European Nasdaq). Europe has a shortfall of €19 trillion in market capitalisation compared with the United States, which is equivalent to the market value of the American digital giants. If we do not address this structural gap, it will continue to widen, and France and Europe will risk being left behind in economic history.

This blog post was first published by the Molinari Economic Institute.

Cécile Philippe is the President of the Molinari Economic Institute.