Tech giants rip new French digital taxes

Tech giants rip new French digital taxes
© Greg Nash

U.S. tech giants and an array of their trade groups slammed France over its new digital taxes law during a public hearing on Monday, arguing the legislation unfairly targets U.S. technology companies and could hobble their operations.

Representatives from Google, Facebook and Amazon testified before a group of government officials investigating the digital services tax, laying out their arguments to a largely sympathetic panel that referred to the French law as unprecedented.

ADVERTISEMENT

The United States Trade Representative (USTR) launched a probe into France's digital taxes last month, using the same aggressive process that previously resulted in the Trump administration's implementation of significant tariffs on China.

The Trump administration has largely presented a united front with the tech companies over France's digital services tax, which imposes a 3 percent tax on the annual revenues of mostly American companies.

The French tax targets firms with annual global revenue of more than $832 million, or 750 million euros, annually, thus sweeping up top American tech companies, which are some of the largest and most valuable in the world.

"Our members are highly concerned with the discriminatory nature of the French government’s DST specifically against successful American companies," said Stephanie Holland, vice president of federal and global policy with CompTIA, a trade group representing the tech industry.

"Tax requirements will disproportionately harm some of the most successful global enterprises based in the U.S.," she added.

The USTR is probing whether the law is "discriminatory or unreasonable and burdens or restricts United States commerce."

The investigation — carried out under Section 301 of the Trade Act of 1974, which allows the White House to retaliate against trading partners — could last for up to a year, a USTR spokeswoman told The Hill. After the hearings on Monday, the investigators will dig into the evidence around the allegations and comb through public comments on the digital tax law.

They will ultimately come up with a report on their findings, which the Trump administration will consult before making a decision about potential retaliatory measures.

At the hearing, Google's trade policy counsel, Nicholas Bramble, warned that the company is facing the "pretty serious challenge of reengineering our systems" in light of the tax, while Amazon's director of international tax policy, Peter Hiltz, predicted it could cost the retail giant millions of dollars.

"This will cost us millions of dollars to write the systems to collect the data in the first place," Hiltz said, noting that Amazon does not collect the kind of data the law requires to assess how much companies should pay.

The companies agreed it will require significant resources to calculate how much they should pay, an equation that will rely on information the firms typically keep private or do not collect at all, including where users are located.

"We expect additional tax compliance, audit, engineering and maintenance costs," said Alan Lee, Facebook's head of global tax policy.

Hiltz from Amazon said the taxes will raise costs for the small- to medium-sized businesses that sell their products on Amazon's online marketplace, raising the possibility that consumers could take a hit as well. Amazon announced it is raising seller fees to accommodate the new digital tax.

The tech companies testified before a panel of officials from various federal agencies who are leading the Section 301 investigation.

The officials, from the Department of Commerce, State Department, Department of Homeland Security and others, asked the companies to describe how "unusual" the law is.

Matthew Schurers, the chief operating officer of the Computer and Communications Industry Association, accused France of "gerry-mandering" or "ring-fencing" around U.S. exporters.

Nearly all of the top tech companies in the world are U.S.-based.

The Organization for Economic Cooperation and Development (OECD), an intergovernmental economic organization, is currently negotiating over how to update tax law to account for the digital landscape.

The companies and trade groups threw their support behind the OECD process, saying the French digital taxes should not go into place before those negotiations result in action.

Schurers said the French digital services tax and other "unilateral measures" could "threaten to undermine multilateral progress we’ve seen at OECD."

Holland of CompTIA accused France of attempting "to target US technology companies."