Monday 2 December 2019 11:37 pm

US to slap France with tariffs over 'burdensome' digital tax

The US has vowed to slap tariffs of up to 100 per cent on $2.4bn (£1.6bn) of French goods, in retaliation over findings that a new digital services tax in the country would harm US tech companies.

US trade representative (USTR) Robert Lighthizer said its investigation found that the French proposal was “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies”, such as Google , Facebook, Apple and Amazon.

He added the US government was also exploring whether to open similar investigations into the digital services taxes of Austria, Italy, and Turkey.

The move would impact French imports into the US of Champagne, handbags, cheese and other products.

It followed preliminary investigations by the European Commission, revealed earlier in the day, into non-compliance of data use by Google and Facebook.

Read more: EU Commission to open investigation into data usage by Google and Facebook

The body is already investigating Amazon over similar compliance issues.

“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 US companies,” Lighthizer said.

“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies, whether through digital services taxes or other efforts that target leading US digital services companies.”

A notice posted by the USTR said the French digital tax proposal was also inconsistent with tax norms by taxing revenue rather than income, and applying the levy to global revenue versus that which is earned inside its own borders.

The USTR has opened an invitation for public comment on the tariffs, with a deadline of 6 January 2020. A subsequent hearing will take place on 7 January at the US International Trade Commission.

France approved the tax plan in July, making way for a three per cent tax on digital companies with global revenues of more than €750m (£685m).

Read more: Tech giants hit back at France’s digital tax

Former chancellor Philip Hammond made similar plans for the UK in last year’s autumn Budget, proposing a two per cent levy on revenues of more than £500m. The Treasury had vowed to plough on with the levy in July, despite the US’ threat of action against France.

The OECD outlined plans in October for its own digital services tax, which would also cross borders and focus on revenue rather than profit. The proposals are still currently under discussion, with a final decision to be made in January.

Approximately 30 companies have been identified as eligible for the French tax, mostly of US origin. Amazon has already responded to the proposal by raising its seller fees in France by three per cent to offset costs.