US to hold hearing on French tax investigation

Nellie Chapman
July 14, 2019

The final vote in favor of the tax in the French Senate came hours after the Trump administration announced an investigation into the tax under the provision used previous year to probe China's technology policies, which led to tariffs on $250 billion worth of Chinese imports.

With Britain and a number of other European countries planning to follow France's lead by imposing similar levies, the pressure is mounting on the giants of California's Silicon Valley.

Around 30 companies will be affected -mainly U.S. groups- including Alphabet, Facebook, Amazon and Microsoft.

On Thursday, the French Senate approved the 3% levy that will apply to revenue from digital services earned in France by firms with more than 25 million euros in French revenue and 750 million euros worldwide.

The US government says it will conduct a so-called Section 301 investigation into the French tax.

Trump's call for an investigation marks a change in tone for the president, who has spent weeks accusing America's biggest tech firms of bias against conservatives bias and hinting at antitrust grievances.

France pushed ahead with the tax after European Union countries failed to agree a levy valid across the bloc in the face of opposition from Ireland, Denmark, Sweden and Finland.

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In Britain and France, for instance, it is estimated that Amazon paid an effective corporate rate tax in the past few years of just 0.1 per cent on its turnover, an astonishing 20 to 30 times less than the tax burden of traditional retailers.

Draft legislation introduced Thursday in the United Kingdom would impose a 2% tax on local revenue of large search companies, social media platforms and online marketplaces, starting in 2020.

Nevertheless, those most likely to be hit by the measure are largely American giants, and the Trump administration in Washington is determined to defend its online operators. The tax would be applied only to companies with global revenues in excess of £500m and revenue of at least £25m from United Kingdom activities.

Tech giants face payments in the tens of millions under the measure.

"France is a sovereign state and it alone decides on its taxation mechanisms and it will continue to do so", he said. Robert Lighthizer, the US trade representative, said: "The US is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies".

France is the first country in Europe to introduce this kind of tax. The Organization for Economic Cooperation and Development (OECD) is now reviewing steps to modernize the tax system for the digital economy but has said it won't reach a conclusion until 2020.

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