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US govt orders investigation into France's planned digital services tax

Thursday 11 July 2019 | 09:33 CET | News
Update: 11 July 2019 | 12:52 CET

The US government has expressed concern about the 3 percent digital services tax proposed by France, Reuters reported. Draft legislation on the tax passed France’s lower house of parliament in April and is set to pass the Senate on 11 July. US President Donald Trump has now ordered an investigation into the planned tax. “The US is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” US Trade Representative Robert Lighthizer said in a statement announcing the investigation. Lighthizer said Trump “has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.” 

The move gives Lighthizer up to a year to see if the tax will hurt US tech companies. Prior investigations have covered Chinese trade practices and European Union subsidies on large commercial aircraft. The probe could lead the US to impose new tariffs or other trade restrictions. 

French Finance Minister Bruno Le Maire said in March that the tax on the French revenue of large internet companies could yield EUR 500 million per year. The Office of the United States Representative (USTR) said the “services covered are ones where US firms are global leaders. The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies.” Le Maire said the tax would target some 30 companies, mostly US but also Chinese, German, Spanish and from the UK, as well as one French firm and several firms with French origins that have been bought by foreign companies. 

If passed, the tax will affect companies with at least EUR 750 million in annual revenues and apply to revenue from digital businesses, including online advertising. Google, Apple, Facebook and Amazon would certainly be subject to the tax. 

Tech industry lobby group ITI, which represents Apple, Amazon, Google and other tech companies, has urged the US not to resort to tariffs in the dispute. “We support the US government’s efforts to investigate these complex trade issues but urge it to pursue the 301 investigation in a spirit of international cooperation and without using tariffs as a remedy,” Jennifer McCloskey, ITI’s vice president of policy, said in a statement. 

Senate Finance Committee Chairman Chuck Grassley, a Republican, and Senator Ron Wyden, the top Democrat on the panel, praised the investigation. “The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers,” they said in a joint statement. “The US would not need to pursue this path if other countries would abandon these unilateral actions and focus their energies on the multilateral process that is underway,” the statement added. Lighthizer said the US “will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy.”

In response to news about the investigation, France’s finance ministry said the planned tax was in line with international agreements. “For us, (the tax) is totally compliant with international agreements. Countries are sovereign on tax matters. So for us it is inappropriate to use a trade instrument to attack a sovereign state,” the finance ministry source said.

[11/07/2019 12:52 - Update: added statement from French ministry]


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Categories: General
Countries: France / United States
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