The Office of the U.S. Trade Representative (USTR) said France’s digital services tax (DST) discriminates against U.S. companies and is inconsistent with the “prevailing principles” of international tax policy.
President Trump reacted to the USTR investigation’s findings on Dec. 2 by proposing 100% tariffs on up to $2.4 billion in French product imports.
USTR, which conducted the investigation under Section 301 of the 1974 Trade Act, said the French digital services tax penalizes U.S. technology companies, such as Google, Apple, Facebook and Amazon.
“USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” said U.S. Trade Representative Robert Lighthizer in a statement.
France’s digital services tax imposes a 3% levy on gross revenues generated from providing two categories of digital services, namely “digital interface” and “targeted advertising,” directed at consumers living in France.. The tax applies only to companies that generate more than 750 million euros ($830 million) globally and 25 million euros ($27.7 million) for services provided to French consumers. The tax applies retroactively, starting Jan. 1, 2019.
The USTR will issue a Federal Register notice explaining its reasons for finding the French digital services tax as “unreasonable, discriminatory, and burdens U.S. commerce” and will solicit public comments through Jan. 6 on its proposal to impose additional duties on up to 100% on certain French products. The list of French products subject to potential duties includes 63 tariff subheadings with an approximate trade value of $2.4 billion.
The trade negotiator’s Section 301 committee will hold a public hearing in Washington, D.C., starting at 9:30 a.m. on Jan. 7 regarding its proposed actions against the French digital services tax.
USTR is also considering similar Section 301 investigation against digital services tax programs in Austria, Italy and Turkey.
“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies,” Lighthizer said.
U.S. importers and exporters, meanwhile, are concerned about the impact of the proposed tariffs on French goods, such as wine, cheeses and handbags, and the possibility that France or the European Union will respond in kind with retaliatory tariffs on U.S. goods.
“The U.S. Chamber strongly opposes France’s DST, which discriminates against U.S. companies,” said Marjorie Chorlins, the chamber’s senior vice president for European affairs. “In our view, the path forward is for all parties to redouble efforts to devise a multilateral solution to the tax challenges posed by digitalization of the global economy in the negotiations now underway at the OECD.”