USA. Following France’s decision to pass a law to implement the Digital Services Tax (DST) last July, the Trump administration has threatened to levy tariffs of up to 100% on handbags, wines, and other products from the European Union’s third-largest economy by share of GDP (source: Eurostat).
Last month, the US Trade Representative (USTR) completed the first segment of its investigation into France’s Digital Services Tax (DST) and, in a statement, concluded that “it discriminates against US companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies”.
The USTR said that the French DST discriminates against US digital companies such as Amazon, Apple, Facebook and Google. “In addition, the French DST is inconsistent with prevailing tax principles on account of its retroactivity, its application to revenue rather than income, its extraterritorial application, and its purpose of penalising particular US technology companies”.
Counter measures could include additional duties of up to 100% on certain French products whose approximate trade value is US$2.4 billion. The list of goods includes many categories sold in the duty free and travel retail sphere, including all Champagne and sparkling wines made from grapes, handbags, and beauty products such as makeup, skincare and soaps.
Extra duties on these goods in the domestic market will make the same goods in travel retail more price competitive assuming these duties do not have to be applied.
Warning to the wider EU
Ambassador Robert Lighthizer noted: “The United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies. Indeed, USTR is exploring whether to open investigations into the digital services taxes of Austria, Italy, and Turkey.
“The USTR is focused on countering the growing protectionism of European Union member states, which unfairly targets US companies, whether through digital services taxes or other efforts.”
The USTR issued a Federal Register notice soliciting comments from the public on its proposed actions, and an open hearing took place last week. Post-hearing rebuttal comments had to be submitted earlier this week.
France’s Economy and Finance Minister Bruno Le Maire said that any retaliatory US action against France’s DST would lead to escalation. According to Reuters, Le Maire told France Inter radio that “if there were to be sanctions, and it is a possibility that we will take sanctions, we would immediately contact the WTO (World Trade Organization)”.
For the full report from the USTR on France’s Digital Services Tax click here.
