Due to the digital tax problem, the United States and France regenerated. On December 2nd the U.S. government said it was considering a retaliatory tariff of up to 100 percent on $2.4 billion worth of French exports, including Champagne, handbags and cheese, because of a new tax on digital services that France unfairly imposed on U.S. technology companies, the Associated Press reported. Analysis by the Financial Times said it marked an escalation of trade tensions between the US and France.
The EU stands up for France.
The U.S. plan to impose tariffs on France is based on the “301 survey” of the U.S. Trade Representative’s Office (“USTR”). According to the Consumer News and Business Channel, USTR will consult the public on the list of tariff collection plans by January 14, 2020, and hold a public hearing on January 7.
U.S. Internet companies praised USTR’s actions. “The Internet is a big export to the United States, and a discriminatory digital service tax is a trade barrier for innovative U.S. companies and small businesses, and the USTR’s response is to defend the Internet,” said Jordan Haas, director of trade policy at the American Internet Association, according to the Capitol Hill Newspaper. “
French Finance Minister Michel Le Maire said it was “unacceptable” to the latest U.S. tariff threat and promised “a strong response from the European Union if the U.S. imposes new sanctions,” Deutsche Welle reported.
The EU stands for France. On December 3rd the European Commission said the European Union would negotiate with the United States on how to resolve a dispute over France’s new digital services tax, and that EU countries would work together to tackle a U.S. plan to impose tariffs on French goods, Reuters reported. The European Commission may resolve the trade dispute through the WTO.
Since this year, the United States and France on the issue of digital services tax has repeatedly been tug-of-war. In July, the French Senate approved a 3% tax on digital services imposed on multinational Internet companies. The regulation is global, but it has been hit hardest by the large number of large U.S. Internet companies. After 90 days of negotiations, the U.S. and France have failed to agree on a digital services tax.
Maintaining digital sovereignty
According to consumer news and business channels, the USTR said the French tax was “inconsistent with the current principles of international tax policy and is a very burden on affected U.S. companies such as Google, Facebook, Apple and Amazon.”
But France clearly doesn’t think so. France’s minister for the digital economy, Cedric O, said the tax on digital services was not a discriminatory tax, but applied to every company with a digital business model, AFP reported.
Large digital service companies are shifting profits around the world in an effort to minimise taxes, according to an analysis by Russian television today. This practice is known as the “double Irish sandwich”. Google, for example, is required to pay 26 per cent of taxes globally, while small and medium-sized businesses pay 50 per cent. This has angered some European countries, such as France.
In fact, Italy, Spain, the United Kingdom, Austria and other European countries also have a tendency to levy a digital service tax, but France was the first to take action.
“There are inherent reasons for France’s insistence on a digital service tax. Wang Shuo, deputy director of the European Institute of the China Institute of Modern International Relations, believes that as part of Macron’s european strategic autonomy, France’s introduction of a digital service tax is conducive to European unity, competition with major powers in the digital industry, and the preservation of European digital sovereignty.
Wang said that as an important u.S. ally, France maintains close ties with the U.S. in political, security and other areas, but the two sides have great differences in economic interests. This makes the economic game between France and the United States inevitable.
Highlighting the U.S.-European Rift
The United States and France have not given up on dialogue. Radio France Internationale reported that the digital services tax is essentially temporary. Earlier, before the Senate voted on the digital services tax bill, Le Maire stressed that France would abolish the digital service tax once a convincing international solution to the digital tax loophole.
The U.S. and France are continuing to work together through the Organization for Economic Cooperation and Development on international tax rules, hoping to come up with a plan to address the tax challenges of the digital economy by the end of next year, the Capitol Hill newspaper reported.
But as Many European countries have joined the ranks of the collection of digital services tax, the U.S.-French digital tax debate has become less simple. Italy will introduce a digital tax similar to France’s from January 1 next year, and both parties have pledged to impose a digital service tax in the uk, which is about to be held, Bloomberg reported.
The United States is naturally reluctant to “lose money”. U.S. Trade Representative Lethzekie said the U.S. government is also looking into whether to conduct a similar investigation into the tax on digital services in countries such as Austria and Italy, and that “the U.S. Trade Representative’s office is committed to fighting against growing protectionism in EU member states,” Reuters reported. “
“The economic and trade disputes between Europe and the United States have never stopped, and the digital services tax dispute is only the tip of the iceberg. Wang Shuo believes that the digital services tax dispute is one of the embodiments of the transatlantic rift, although it will not have a fundamental impact on the U.S.-France relationship and U.S.-European relations, but the dispute is not expected to be resolved in the short term.