Trump on the France digital services tax
Source: BBC.com

Donald Trump, the US President has ordered an investigation into France’s planned digital services tax on tech giants last Wednesday. This is a strong move that could end up in retaliatory tariffs. Trade representative of Trump has said that the United States is very much concerned about France’s planned tax as it “unfairly targets American Companies”. In reply, France argues that these tech giants are exploiting tax loopholes.

The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,”- Robert Lighthizer said.

He also said that the proposed three per cent tax on total yearly revenues of the tech companies which are providing service to the French consumers is applicable only the largest companies. And these firms are global leaders.

What French Argues

French argues that tech giants are very much able to find their headquarters in low-tax countries. They declare most of the profits on the low-tax countries and easily minimize their tax bills. The new tax can be applied retrospectively from the beginning of 2019 and it can raise about €400m ($450m; £360m) this year. A digital company which has more than €750m revenue and its €25m are made in France would be subject to this new three per cent tax.

Some heavyweight digital companies have taken advantage of the low-tax jurisdictions in Ireland paying a very small amount and in other countries, they are gaining huge profits.

Section 301 investigation is the main tool that Trump has used in the recent trade war with China to properly justify tariffs.

What the US said?

[Mr. Trump] 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,”- Robert Lighthizer added.

This investigation can result in punitive tariffs. And there are a lot of examples of this kind of tariffs Donald Trump has made since he took the chair.

This inquiry is welcomed by Chuck Grassley, Republican Senate Finance Committee Chairman and Senator Ron Wyden, panel’s senior Democrat. In a joint statement, they said, “The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers.

The United States is trying for an overarching agreement on this taxation with the help of the group of twenty economic forums and it is supported by Google. The group of twenty finance minister also said: “We will redouble our efforts for a consensus-based solution with a final report by 2020,”.

CCIA official Matt Schruers said, “This is a critical step toward preventing protectionist taxes on global trade,” and “CCIA encourages France to lead the effort toward more ambitious global tax reform, instead of the discriminatory national tax measures that harm global trade.”

Mr. Lighthizer’s office can hold the hearings over many weeks before offering a final report with recommendations.

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