Burning ambers of global trade wars got added fuel as The United States Trade Representative Office (USTR) launched an investigation over aggressive French Digital Service Tax (DST) also known as GAFA Tax.
Also known as GAFA (an acronym for Google, Apple, Facebook and Amazon besides other US Corporate giants) this French DST bill would impose a 3% tax on total annual revenues generated by some companies from providing certain digital services to, or aimed at, French users. The tax applies only to companies with total annual revenues from the covered services of at least €750 million globally and €25 million in France.
French Digital (GAFA) Tax Attract Stern US Warnings
Robert Lighthizer U.S. Trade Representative said,
“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies. The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”
USTR official press release said that the United States will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy.
French Economy Minister Bruno Le Maire had explained in an interview with the Le Parisien newspaper on April 3, 2019,
” The purpose of this tax is to achieve a fairer and more efficient tax system, which taxes value where it exists, i.e., in the data, in order to finance public services, schools, nurseries, and hospitals. Today, digital giants pay 14 percentage points less tax than European SMEs. The fact that these companies pay less tax than a cheese producer in Quercy is a real problem.”
The US is already engaged in a major spat China and India over thorny trade issues, and now with The US-France issue appearing out in the open, businesses will continue to dither significantly. Implications of such action will undoubtedly be weighed in with bated breath across the world.
The USTR communique said,
“The United States will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy.”
Big Four (Google, Apple, Facebook & Amazon) among others have not let out any official words on the subject so far, displaying subtle patience waiting on the sidelines as both the Governments make new moves.
Will the Trump Administration force France to take back DST? Are the trade wars heading for long-drawn battles in global fora? Any views to share? Love to hear fast…