by Mike Godfrey, Tax-News.com Washington
08 January 2020
On January 6, 2020, the United States Trade Representative (USTR) announced that an on-the-record but off-camera public hearing would be held on January 7 on proposed action against France’s digital services tax (DST).
The French DST is a three percent tax 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 (USD838m) 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, applies to turnover realized in France since January 1, 2019, and is expected to affect around 30 companies supplying digital services in France.
The USTR initiated an investigation of France’s DST on July 10, 2019, under Section 301 of the Trade Act of 1974. Then, on December 2, 2019, the USTR published a report which 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 also 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 that would potentially face duties includes 63 tariff subheadings with an approximate trade value of USD2.4bn. The comment period on the proposed action concluded on January 6, 2019.