Row as US plans sanctions against France for digital services tax

The US has threatened trade sanctions against France, saying its digital services tax unfairly targets American companies such as Google, Facebook, Apple and Amazon. The US government said it’s considering similar action against Austria, Italy and Turkey for passing digital taxes.

The US Trade Representative conducted an investigation into the French tax, which took effect in July. It found the levy on digital services goes against common tax principles, as it applies to revenue rather than income and covers income generated outside France as well. Furthermore, it penalises specific US technology companies, the report said.

The USTR has recommend in response sanctions of up to 100 percent on certain French products worth USD 2.4 billion in annual trade, including handbags, make-up, champagne and cheese. The proposed sanctions and report are subject to public comment until 6 January, and a public hearing in Washington is planned for 7 January. The trade office said it plans to act expeditiously on the proposed sanctions.

The decision was welcomed by the Internet Association and the Computer and Communications Industry Alliance, which had submitted comments in the USTR’s intial investigation. The industry groups favour the ongoing process by the OECD to realise a new system of taxation for multinational companies, rather than unilateral national efforts to target digital companies.

France agreed in August to refund any companies that may pay more under its tax than the eventual system agreed by the OECD. However, the US has not endorsed the agreement. The OECD is expected to present its proposal in 2020.