The Office of the United States Trade Representative (USTR) has announced the conclusion of its Section 301 investigation into France Digital Services Tax (DST), finding that the tax discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. As a result, additional duties of up to 100% may be imposed on French products with an approximate trade value of USD 2.4 billion.
Washington, DC – The U.S. Trade Representative has completed the first segment of its investigation under section 301 of the Trade Act of 1974 and concluded that France's Digital Services Tax (DST) discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. Specifically, USTR's investigation found that the French DST discriminates against U.S. digital companies, such as Google, Apple, Facebook, and Amazon. 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 penalizing particular U.S. technology companies. A report available on USTR's website sets out the findings of the investigation.
"USTR's decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies," Ambassador Robert Lighthizer said. "Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey. The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies."
USTR is issuing a Federal Register notice explaining that, for the reasons set forth in the report, the French DST is unreasonable, discriminatory, and burdens U.S. commerce. The notice solicits comments from the public on USTR's proposed action, which includes additional duties of up to 100 percent on certain French products. The notice also seeks comment on 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 $2.4 billion. The value of any U.S. action through either duties or fees may take into account the level of harm to the U.S. economy resulting from the DST.
USTR invites public comment on these issues. To be assured of consideration, comments on the proposed action must be submitted by January 6, 2020 and post-hearing rebuttal comments by January 14, 2020. Additionally, the Section 301 committee will hold a public hearing beginning at 9:30 AM on January 7, 2020 regarding proposed action to be taken in this investigation. The hearing will take place in the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. USTR expects to proceed expeditiously thereafter.
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