#1267080: Trump Orders Investigation Into French Tax That Will Hurt U.S. Tech Giants
|BRI comment:||The DST bill will affect around 30 U.S. tech firms, as well as companies from China and the U.K. Only one French company, Criteo, would be impacted. In 2017, Facebook paid corporate taxes of $2.1 million (€1.9 million) in France on revenues of $63 million (€55.9 million). Apple, meanwhile, paid roughly $21 million (€19 million) in the same year to France.|
The United States government has launched an investigation into a French tax that would cost U.S. technology giants like Google and Facebook hundreds of millions of dollars every year.
The French digital services tax (DST) bill, passed on Thursday, will impose a 3% tax on annual revenues generated by digital companies with revenues in excess of $845 million (€750 million) globally.
“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” said U.S. trade representative Robert Lighthizer in a statement on Wednesday.
“The President 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.”
Lighthizer, who is President Donald Trump's most senior trade official, will examine the bill through what's known as a Section 301 investigation.
The DST bill will affect around 30 U.S. tech firms, as well as companies from China and the U.K. Only one French company, Criteo, would be impacted.
U.S. tech giants often place their European headquarters in Ireland (where corporation tax of 12.5% is one of the lowest in European Union) so they can pay less tax on their European revenues.
In 2017, Facebook paid corporate taxes of $2.1 million (€1.9 million) in France on revenues of $63 million (€55.9 million). Apple, meanwhile, paid roughly $21 million (€19 million) in the same year to France.
France's digital tax is designed to ensure that large technology firms pay tax where they make their profits. It comes after France failed to convince the EU to impose a digital tax that would have been adopted across the bloc. Ireland, Sweden, and Denmark all opposed the plan.
A finance ministry source reportedly told The Guardian: "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."
French officials reportedly told the Financial Times that the DST bill is a temporary measure until a broader international agreement is secured on how and where tech giants should pay taxes.
This is not the first time the U.S. has carried out a Section 301 investigation. In 2017, Washington conducted a Section 301 investigation into China's trade practices, which resulted in increased tariffs on Chinese imports and triggered the ongoing US-China trade war.
Trump visited Normandy in France last month to commemorate the 75th anniversary of the D-Day landings. While there, he met with French President Emmanuel Macron and suggested that France places unfair trade tariffs on American wine to protect its own wine industry.
Russ Shaw, founder of campaign group Tech London Advocates and Global Tech Advocates, said he disagrees with France's DST bill.
"Tech giants must pay their fair share and we require the contemporary tax policies to ensure that they do—but plans announced by France today are misguided and risk sending the wrong message to the tech community. At present the proposed legislation that targets sales of services is confusing and may not limit the clever accounting by big tech that it intends to."
Shaw added: "EU states should avoid going alone with unilateral action which threatens their own tech ecosystems but instead accelerate efforts to get this done at the OECD level—who can lead the way with international reform. It is critical that policymakers do not underestimate the contribution that large tech companies make to the economy through investment, knowledge transfer and employment."
|Date added||July 11, 2019, 2:48 p.m.|