Picture: BLOOMBERG/KRISZTIAN BOCSI
Picture: BLOOMBERG/KRISZTIAN BOCSI

Washington — Major tech firms and US tech industry groups said on Monday that France’s new digital services tax undermines the global tax regime and multilateral efforts to reform it.

Alphabet’s Google, Facebook and Amazon.com and major trade associations testified on Monday against the tax at a hearing before the US trade representative’s office and other government officials.

The French Senate in July approved a 3% levy that will apply to revenue from digital services earned in France by companies with more than €25m in French revenue and €750m worldwide.

“It does depart from even the outlines of what we expect out of the OECD (Organisation for Economic Co-operation and Development),” said Daniel Bunn, director of global projects at the Tax Foundation, commenting on OECD-wide efforts to create a global agreement on taxing the digital economy.

The US Chamber of Commerce said the tax will generate revenue of approximately €500m a year “a large majority of which will be paid by US firms” and will cost US firms millions to conduct “significant re-engineering of accounting systems to ensure that they can accurately assess” liability.

Major tech firms warned of increased costs.

“Unilateral measures like the DST are harmful to Facebook and the digital economy,” Alan Lee, Facebook’s global head of tax policy, said in a statement.

Matthew Schruers, chief operating officer at the Computer and Communications Industry Association (CCIA), representing companies such as Intel, eBay and Netflix, said at the hearing that the tax “undermines the progress made” on a new tax system on the digital economy and “supports an aggressive response to this problem”.

“CCIA believes that this action warrants a substantial, proportionate response from the US,” Schruers said, adding the tax “unquestionably” targets US firms in an attempt by the French government to “ring fence” them.

Amazon’s international tax policy director Peter Hiltz said more than 10,000 French-based businesses are selling on Amazon’s online stores and the company had notified them that some fees will increase by 3% for Amazon.fr sales starting on October 1.

In July, President Donald Trump threatened to tax French wines or other products in response. The US trade representative’s office could impose new tariffs after a public comment period ends on August 26.

Other EU countries have also announced plans for their own digital taxes, arguing a levy is needed because multinational internet companies book huge profits in low-tax countries such as Ireland, no matter where the revenue originates.

Reuters