French Finance Minister, Bruno Le Maire, termed the US’ proposed action as unacceptable.
The United States is planning to retaliate against the French digital service tax (DST) with additional duties of up to 100 percent tariffs on French products worth USD 2.4 billion.
The US Trade Representative, on December 2, issued a Federal Register Notice explaining that the three percent French DST discriminates against US companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies.
The US trade officials found that the tax discriminates against US digital companies such as Amazon, Apple, Facebook, and Google.
The DST is imposed on gross revenues generated from provision of two kinds of digital services: digital interface services and targeted advertising services. The tax applies retroactively from January 1, 2019.
The tax applies only to companies that generate EUR750m globally, and EUR25m for services provided to, or aimed at, persons in France.
In July this year, the US Trade Representative launched an investigation, under section 301 of the US Trade Act, into whether the French tax is discriminatory in nature and harms US’ interests.
The US Trade Representative, on December 2, concluded that the tax is inconsistent with prevailing tax principles on account of its retroactivity, its application to revenue rather than income, its extraterritorial application, and its purpose of penalizing US tech companies.
French Finance Minister, Bruno Le Maire, termed the US’ proposed action as “unacceptable.”
“In case of new American sanctions, the European Union would be ready to riposte,” he told Radio Classique.
Section 301 give the US Trade Representative broad authority to investigate and respond to a foreign country’s unfair trade practices.
The Section 301 committee will hold a public hearing on January 7, 2020, regarding proposed action to be taken in this investigation.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com