US proposes retaliatory tariffs
US trade representative Robert Lighthizer says his country will take action against moves that discriminate against or unduly burden US companies
The US has proposed tariffs on about $2.4bn in French products in response to a tax on digital revenue that hits large US tech groups, including Google, Apple, Facebook and Amazon.
The US has proposed tariffs on about $2.4bn in French products, in response to a tax on digital revenue that hits large US tech groups including Google, Apple, Facebook and Amazon.
“France’s digital services tax discriminates against US companies,” the office of the US trade representative said on Monday.
US trade representative Robert Lighthizer said the agency was also exploring whether to investigate similar digital taxes by Austria, Italy and Turkey. The move came hours after US President Donald Trump announced a raft of tariffs on steel and aluminium from Argentina and Brazil.
The trade representative’s “decision today sends a clear signal that the US will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies”, Lighthizer said.
He said he was focused on “countering the growing protectionism of EU member states, which unfairly targets US companies”. The tariffs would be imposed after a period of public comment ended in early 2020 and interested parties had their chance to weigh in.
WINE AND CHEESE
Monday’s report concludes more than four-month-long probe, known as a section 301 investigation, into France’s tax regime, which Lighthizer said in July “unfairly targets American companies”.
The same law was used last year to examine China’s intellectual property (IP) practices that led to tariffs on more than $360bn. The US has proposed tariffs on about $2.4bn in French products, but other European countries are also planning to levy a digital tax on US tech giants in Chinese goods.
In August, Trump suggested tariffs of up to 100% on French wine, and told aides that while he was not generally empathetic with US tech companies he believed it should be the US, not
any other country, that taxed them, said people familiar with internal deliberations.
The trade representative said on Monday that the proposed action included “additional duties of up to 100% on certain French products”.
Sparkling wine, cheese, handbags and cosmetics are on the list of potential tariff targets, according to the notice. A ministry official would not comment and said finance minister Bruno le Maire would speak on the issue on Tuesday.
TRUMP AND MACRON
The US move sets back efforts to stop a conflict over digital tax intensifying. Trump and France’s President Emmanuel Macron agreed in August to look for a compromise, but a 90-day deadline for talks expired last week without a resolution.
The US tariffs and the French tax are likely to be a priority when Trump and Macron meet on Tuesday, on the sidelines of a Nato conference in London.
Macron argued that pressing on with a tax on tech companies was necessary as the structure of the global economy had shifted to one based on data, rendering current systems archaic. His government was trying to use France’s national tax as a bargaining chip, saying it would withdraw it if there was agreement on an international solution in talks under the stewardship of the Organisation for Economic Co-operation and Development (OECD).
There were signs of progress in recent weeks when the OECD proposed a “unified approach” to merge proposals that differed on singling out digital companies or having a broader approach. before the trade representative said that the US had retreated from supporting an OECD compromise.
“They’ve said they aren’t sure they want a solution at the OECD,” Le Maire said on radio station France Inter. “We will never abandon our will to tax digital giants in a fair way.”
US senators Chuck Grassley and Ron Wyden, the bipartisan pair leading the finance committee, called the French digital services tax “unreasonable, protectionist and discriminatory.
“We encourage other member states considering similar actions to work within the OECD framework toward a comprehensive solution.”
US lobby group the Internet Association, representing tech companies, said France’s levy was “one of a growing number of concerning unilateral tax regimes around the world” and advocated a global solution in response to the announcement.
DIGITAL SALES
France’s tax, retroactive to January, affects companies with at least €750m in global revenue and digital sales of €25m in France. While most of the 30 or so businesses affected are American, the list includes Chinese, German, British and French companies.
The French government says that it is urgent to overhaul tax rules because the average tax rate for digital companies in the
EU is only 9.5%, compared with 23.2% for other companies.
A bid to agree on a Europewide tax fell through this year when four countries Sweden, Finland, Denmark and Ireland declined to sign off on it. But Margrethe Vestager, EU antitrust chief, said last week the bloc would try to find unity again if there was no global agreement.
Other European countries plan to levy a digital tax without waiting for the OECD. Italy has said it will implement a tax on digital revenues on January 1. Boris Johnson’s Conservative Party, leading polls in the UK election, has committed to a digital services tax.
SPARKLING WINE, CHEESE, HANDBAGS AND COSMETICS ARE ON THE LIST OF POTENTIAL TARIFF TARGETS