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GAFA tax:
It is named after Google, Apple, Facebook, Amazon. So, statement 2 is not correct.
It is a proposed digital tax to be levied on large technology and internet companies. So, statement 1 is correct.
France has decided to introduce the tax (3% tax on revenues from digital activities).
The rationale for having separate taxation on digital firms:
- Existing tax norms that are framed envisaging brick and mortar business models are not suitable to regulate online services.
- The technology companies differ from traditional businesses as a result of user participation in creating value, which, in turn, translates into revenue.
- The often complex corporate structures set up by several companies that derive huge revenues from major European economies but allow them to slash their tax bills by shifting profits to low-tax jurisdictions. (Base Erosion and Profit Sharing issue)
- European countries in particular say the so-called GAFA — Google, Apple, Facebook, and Amazon — are unfairly exploiting tax rules that let them declare profits in low-tax heavens, depriving them of a fair share of their fiscal payments.