Trump teams with Big Tech vs. France

The Washington Times Weekly - - Geopolitic­s - BY BEN WOLF­GANG

An un­likely al­liance of Pres­i­dent Trump, Amazon and Sil­i­con Val­ley are team­ing up to bat­tle a com­mon en­emy, France, in a high-stakes fight that car­ries ma­jor con­se­quences for cut­ting-edge com­merce on both sides of the At­lantic.

The Of­fice of the U.S. Trade Rep­re­sen­ta­tive hosted a pub­lic hear­ing in Wash­ing­ton as part of its in­ves­ti­ga­tion into France’s un­prece­dented “dig­i­tal ser­vices tax,” or DST, a 3% levy on tech rev­enue gen­er­ated on­line in the French do­mes­tic mar­ket. Of­fi­cials from Amazon, Google, Facebook, Mi­crosoft, Twit­ter and a host of other heavy hit­ters spoke out against the tax, march­ing in lock­step with the White House in ar­gu­ing that the move will raise prices for cus­tomers and could lay the corner­stone for con­struc­tion of a con­fus­ing, dan­ger­ous global patch­work of taxes and reg­u­la­tion.

France is the first coun­try to en­act a DST, and of­fi­cials in Paris have ar­gued that companies such as Amazon and Facebook make huge prof­its within their bor­ders while skirt­ing taxes. Spain, New Zealand, Italy and other na­tions are re­port­edly con­sid­er­ing sim­i­lar moves as they search for ways to col­lect rev­enue from companies with a mas­sive pres­ence in their do­mes­tic economies.

U.S. tech giants have such a fear­some rep­u­ta­tion in Europe as a com­pet­i­tive threat that they have earned an acro­nym, the “GAFAs,” for Google, Apple, Facebook and Amazon. The GAFAs are ac­cused of set­ting up nom­i­nal head­quar­ters in low-tax states, no­tably Ire­land, to lighten their tax bills across the Euro­pean Union.

Mr. Trump ex­ploded on Twit­ter when France im­posed the levy last month, say­ing Paris was de­lib­er­ately tar­get­ing “our great Amer­i­can tech­nol­ogy companies.”

“If any­body taxes them, it should be their home Coun­try, the USA,” Mr. Trump tweeted. “We will an­nounce a sub­stan­tial re­cip­ro­cal ac­tion on Macron’s fool­ish­ness shortly. I’ve al­ways said Amer­i­can wine is bet­ter than French wine!”

French Agri­cul­ture and Food Min­is­ter Di­dier Guillaume re­sponded by call­ing Mr. Trump’s threats “com­pletely mo­ronic.”

Com­ing to­gether

Although the pres­i­dent and con­ser­va­tive crit­ics have long tan­gled with Amer­ica’s tech giants over tax pol­icy and their sus­pected lib­eral lean­ings, they agree that France’s pro­posal — which ap­plies retroac­tively and will tax companies for rev­enue gen­er­ated af­ter Jan. 1 — is short­sighted and fool­ish.

Given the chal­lenges of tax­ing and reg­u­lat­ing a new class of mostly Amer­i­can tech su­per­stars, in­ter­na­tional bod­ies such as the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment are work­ing to es­tab­lish global rules of the road for the 21st-cen­tury in­ter­net-based economy. The French tax, skep­tics say, short-cir­cuits that process.

“This tax, which other na­tions are con­sid­er­ing, rep­re­sents a rad­i­cal de­par­ture from cur­rent prac­tice and would greatly complicate on­go­ing ef­forts by the OECD to ne­go­ti­ate changes to the in­ter­na­tional tax regime by 2020,” the In­for­ma­tion Tech­nol­ogy & In­no­va­tion Foun­da­tion, a lead­ing think tank based in Wash­ing­ton, said in tes­ti­mony.

Go­ing a step fur­ther, the think tank ar­gued that the tax is likely il­le­gal un­der in­ter­na­tional law.

“French au­thor­i­ties have been very clear that the tax is not ex­pected to af­fect many French companies,” the or­ga­ni­za­tion said in its tes­ti­mony. “In­deed, the fact that DSTs tax a por­tion of the sales price from for­eign ser­vices is likely a vi­o­la­tion of in­ter­na­tional trade agree­ments.”

Facebook and other companies ar­gued that it’s ex­ceed­ingly ex­pen­sive and time­con­sum­ing to track ex­actly how much rev­enue is gen­er­ated in any given coun­try.

The companies sug­gested that the im­pact of the French DST would ex­tend far be­yond their own bot­tom lines and could ul­ti­mately re­sult in higher prices for con­sumers.

Right on cue, Amazon an­nounced that it would pass along the 3% tax to Amazon sell­ers in France. U.S. companies that ship to French cus­tomers, Amazon said, also could be sub­jected to new fees.

Amazon’s an­nounce­ment served as a warn­ing that France’s move could rip­ple around the globe and slow what has been a years­long pe­riod of eco­nomic growth.

“We can­not absorb this ex­pense if we are to con­tinue mak­ing in­vest­ments in in­fra­struc­ture,” Peter Hiltz, Amazon’s di­rec­tor of in­ter­na­tional tax pol­icy and plan­ning, told CNN.

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