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US Considers Retaliation Against French Digital Services Tax

by Mike Godfrey, Tax-News.com Washington

06 December 2019


The United States may impose additional duties of up to 100 percent on certain French products in retaliation for France's digital services tax, which a newly published report by the US Trade Representative (USTR) has concluded discriminates against certain US companies.

The report was published on December 2, 2019, and concluded that the tax is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies.

In particular, the USTR's investigation found that the French DST runs counter to international tax norms on account of its retroactivity, its application to revenue rather than profits, its extraterritorial application, and its "purpose of penalizing particular US technology companies."

The USTR has issued a notice soliciting comments from the public on its proposed action, which includes additional duties of up to 100 percent on certain French products, and the option of imposing fees or restrictions on French services. The list of French products subject to potential duties includes 63 tariff subheadings with an approximate trade value of USD2.4bn. Comments on the proposed action must be submitted by January 6, 2020.

The French DST would involve the imposition of a three percent tax rate on the revenue of digital companies providing advertising services, selling user data for advertising purposes, or performing intermediation services. Companies with global revenues of EUR750m (USD828m) or more and French sales of at least EUR25m are required to pay the tax.

The tax, approved by the French parliament on July 11, 2019, will to apply to turnover realized in France since January 1, 2019, and is expected to affect around 30 companies supplying digital services in France.

US Trade Representative Robert Lighthizer also said that his department considering whether to open section 301 investigations into the digital services taxes to be introduced in Austria, Italy, and Turkey.

TAGS: tax | commerce | fees | internet | e-commerce | transfer pricing | Austria | France | Italy | United States | trade | Turkey | services | BEPS

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