The Trump Administration has threatened to increase tariffs against French products as a response to France’s digital services tax.
The proposal, targeting $2.4 billion in trade value, would include cheese, wine, handbags, and other French goods.
According to the US administration, France’s Digital Services Tax (DST) “discriminates against US companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies.”
Passed in July by the French Senate, the bill proposes a three percent tax on technology companies that make €750 million globally and €25 million in France from “public advertising and digital intermediary services to consumers,” as previously reported by ZDNet.
However, a number of online businesses, communication companies, and payment or financial services are exempt.
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This leaves the likes of Google, Apple, Facebook, and Amazon as subject to the new tax laws. The DST is designed to combat the practice of large companies using tax havens to avoid paying high rates of tax.
Trump was displeased at the idea, taking to Twitter in the same month to say, “If anybody taxes them, it should be their home Country, the USA.”
The US Trade Representative (USTR) launched an investigation and has concluded that the French law “discriminates” against US companies under Section 301 of the Trade Act of 1974, and therefore, is now soliciting public comments on proposed tariff changes.
Additional duties of up to 100 percent have been suggested, alongside “the option of imposing fees or restrictions on French services.”
“The value of any US action through either duties or fees may take into account the level of harm to the US economy resulting from the DST,” the USTR added.
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USTR Ambassador Robert Lighthizer said the action “sends a clear signal that the United States will take action against digital tax regimes that discriminate,” and that the regulatory body will counter the growing “protectionism” of EU member states.
Lighthizer also warned that the trade act may also be used to investigate similar taxes introduced by countries including Italy, Turkey, and Austria.
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The United Kingdom plans to introduce its own version of DST (.PDF) in 2020 with a two percent tax on UK revenues. Search engines, social media platforms and online marketplaces “which derive value from UK users” will be subject to the general tax, proposed as a temporary solution until a global solution can be found.
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