Amazon, Facebook, Apple & Others Being Unfairly Targeted By France Believes US Representative

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Last week, the Office of the United States Trade Representative announced that its inquiry into France's decision of imposing a tax on American companies operating in the country. The French, earlier this year, passed a law that required companies providing digital internet-based advertising services to French citizens, to pay a 3% tax on their revenues. The law applies to entities earning more than 750 million euros globally and 25 million euros in France.

Today, Ambassador Robert Lighthizer has confirmed that France's tax law, dubbed as the Digital Services Tax, is unfair towards tech giants Google, Apple, Facebook, Microsoft and Amazon. Take a look below for more details.

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France's Digital Services Tax Discriminates Against US Companies & Is Inconsistent With Prevailing Tax Principles Concludes Trade Representative's Office

The trade office's decision to initiate an inquiry into the French government's decision to impose the digital services tax comes under the purview of Section 301 of the 1974 Trade Act. Section 301, brought to fore by the United States Trade Representative, allows the United States President to take tariff-based and non-tariff -based action against imports and countries.

The results of the inquiry show that the Office of the Trade Representative believes that digital services tax imposed by France against American companies providing internet-based advertising services is discriminatory in nature and inconsistent with prevailing tax principles.

As per the details, the trade office believes that the service tax targets segments predominately dominated by American companies. One such sector is digital advertising, where companies such as Alphabet Inc's Google are more successful than their French counterparts. The report argues that since France has not levied a similar tax on companies that provide 'traditional advertising', the country is discriminating against America.

The French achieve this discrimination by ensuring that only multinationals providing digital advertising services in France come under the new tax net. So while a French digital advertising company can earn more than 25 million euros in the country, if it does not cross the €750 million ceiling listed above, then it will not have to pay an additional 3% off of its revenues to local authorities.

The Digital Service Tax also increases the cost of financial reporting, with systems that conform to the new principles requiring immediate investment. Since it's calculated on revenues, it'll ensure that companies that have to pay the services tax are essentially being asked to cough up earnings to the authorities twice. Revenue, as opposed to Net Income, also does not remove the company's cost of operations from the amount that its sales bring in. Taxing revenues further carries the potential of running smaller firms out of business, belives the trade representative's office.

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Through the new tax, French authorities will also be able to earn from revenues not directed towards entities located in France. So, for example, an advertisement that earns revenue to a company operating out of France and targets a user located in France is subject to tax laws imposed by French authorities. This contravenes international tax principles, as per the American authorities.

Following today's report, the United States Office of the Trade Representative recommends duties as high as 100% for certain French imports. The list of these products covers items such as soap, cheese, wine, handbags, porcelain and tables. The US administration has previously used Section 301 earlier this year to determine which products that the country imports from China can be tariffed.

Thoughts? Let us know what you think in the comments section below and stay tuned. We'll keep you updated on the latest.

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