The Office of the United States Trade Representative (USTR) has put out a statement declaring that there will be an investigation into France’s proposed Digital Services Tax bill which would impose a 3% tax on companies in the tech sector that have taxable a turnover of €750 million on services provided worldwide and €25 million in France, the 3% tax is only applicable on revenue generated inside France. Politicians in France are expected to vote on the bill today.
The USTR said that the investigation will be carried out under Section 301 of the Trade Act of 1974, which, according to the International Trade Administration “is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices”
Commenting on the move, U.S. Trade Representative Robert Lighthizer, said:
“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies. 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.”
Going forward, the USTR plans to issue a notice on how members of the public can submit their views in writing or at a public hearing. Additionally, the statement said that the U.S. will continue working with other OECD countries to come to a multilateral agreement in order to better address issues regarding the digital economy where so many of the products that are used around the world are made by U.S. companies.
By introducing the DST, companies will no longer be able to avoid paying taxes in France where they earn millions of euros. Until now, companies such as Google and Facebook have been able to operate in low-tax countries where they declare most of their profits to minimise the amount of tax they have to pay.
Back in November, we reported on the progress of an EU-wide 3% sales tax on big tech firms, which had stalled thanks to Denmark, Ireland, and Sweden. Meanwhile, in the UK, the incumbent Chancellor, Philip Hammond, had plans to introduce a 2% tax on big tech firms from April 2020 but he’s almost certainly set to be replaced when either Jeremy Hunt or Boris Johnson take over leadership of the country later this month, so those tax plans may not survive.