Author: Mario Petkovski
The United States and France have had a long dispute about taxes for technological giants this whole year. The French Finance Minister Bruno Le Maire has shown his interest in implementing taxes on the revenue of technology companies, way before this altercation.
On July 10th, Donald Trump launched an inquiry to France about its planned tax on the tech giants. This could lead to new tariffs or trade restrictions being placed by the United States government.
In a statement announcing the investigation by the United States, Trade Representative Robert Lightizer said that “the United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies”.
This action gives the U.S Trade Representative Lightizer up to 12 months to investigate if France’s tax plans are going to hurt U.S. technology companies.
The “Section 301” investigation will answer us if the taxes pose as an unfair trade practice. Before, investigations have been conducted about China’s trade practices, as well as European Union subsidies on large commercial aircraft. In March, Le Maire stated this is not just a random gamble, like NFL wagering, and that only a 3% tax on the revenue of French internet companies would bring up to 500 million euros a year.
A statement by USTR followed, which reads “services covered are ones where U.S. 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 U.S.-based technology companies.”
Lightizer said that 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”.
Le Maire has made it clear that this tax would take effect on 30 firms, most of which are American, but also German, British, Spanish, and Chinese. It would also target one French firm and a few other companies that are of French origin.
With this move, Le Maire has allegedly made a blatant move on U.S. technology companies. Considering that most companies are American, it isn’t hard to see if the other countries are involuntary victims of this dispute.
The tax will take effect on companies with as low as 750 million euros in annual revenues and will also include digital business including advertising. Giants like Amazon, Apple, Facebook, Google, will certainly be subjected to this tax.
Many political analysts consider this a political move by the French Finance Minister Bruno Le Maire. However, they are not sure whether the U.S. leans more towards introducing new tariffs or it is just a friendly inquiry, to resolve this issue with good international cooperation.
Tech industry lobby group ITI, that represents Amazon, Google, Apple, and many other tech companies strongly advised the United States to not resort to tariffs in the argument.
The ITI’s vice president of policy Jennifer McCloskey said in a statement “We support the U.S. government’s efforts to investigate these complex trade issues but urge it to pursue the 301 investigations in a spirit of international cooperation and without using tariffs as a remedy,”.
Many who have also praised the investigation include, Senator Ron Wyden, Senate Finance Committee Chairman Chuck Grassley, a Republican, and top Democrat on the panel.
“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 U.S. jobs and harm American workers,” was said in a joint statement.
The United States made clear that they 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.
Robert Lightizer said that the United States 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.
