France Presses On With Digital Tax Despite U.S. Probe--2nd Update
July 11 2019 - 7:12AM
Dow Jones News
By Sam Schechner
PARIS -- France's legislature gave final approval to a new tax
on large tech companies like Alphabet Inc.'s Google and Amazon.com
Inc., shrugging off the threat posed by a new U.S. trade probe into
whether the measure discriminates against American firms.
France's Senate gave a voice vote to approve the new tax, the
first in a series of proposed national taxes on digital services
being debated across Europe. The vote came just hours after U.S.
Trade Representative Robert Lighthizer said his office would
investigate the tax under the same broad law the Trump
administration relied on for its trade conflict with China.
French Finance Minister Bruno Le Maire dismissed the U.S. probe
in an address to French senators ahead of the vote.
"France is a sovereign state. It makes sovereign decisions on
tax matters and will continue to make sovereign decisions on tax
matters," Mr. Le Maire said. "Between allies, we can and we must
resolve our disputes without resorting to threats."
The Franco-American dispute raises tension as the two countries
participate in a new round of multilateral talks under the aegis of
the Organization for Economic Cooperation and Development about how
to overhaul the corporate taxation system for the digital age.
France and other European countries want a system that allocates
more of Silicon Valley's profits to their territories for taxation.
The U.S. wants to avoid a patchwork of unilateral taxes and opposes
measures that target digital companies in particular.
Mr. Le Maire reiterated Thursday his pledge that France will
repeal its new tax once a "credible agreement" is reached at the
OECD, and said that France's proposal should give the U.S. an
additional incentive to negotiate such an agreement.
"Let's accelerate work at an international level," Mr. Le Maire
said. "Let's find a solution at the OECD level, and work via
agreements rather than threats."
Tech companies and their lobbyists have opposed the French tax
and voiced support for the U.S.'s pugnacious response.
Amazon said it applauded the Trump administration for "taking
decisive action against France and for signaling to all of
America's trading partners that the U.S. government will not
acquiesce to tax and trade policies that discriminate against
American businesses."
The Information Technology Industry Council, which represents
Facebook Inc., Google, Amazon and other tech companies has rallied
against digital tax proposals in France and other countries.
Jennifer McCloskey, vice president of policy for the group, said
she supported the probe but urged the U.S. to proceed "in a spirit
of international cooperation and without using tariffs as a
remedy."
A spokesman for Facebook declined to comment and Google didn't
respond to requests for comment. In the past, the companies have
said they pay all the taxes they owe under current rules, but
support multinational efforts to overhaul the corporate tax
system.
The new French measure, which is retroactive to the beginning of
2019, will apply a 3% tax on revenue that companies reap in France
from such activities as undertaking targeted advertising or running
a digital marketplace. It is unusual because it will apply to gross
revenue in France from certain digital activities, somewhat like a
sales tax, rather than taxing companies' profits after
expenses.
The French government put forward its law in March after the
European Union failed to agree on a similar measure. Several other
countries are following suit, arguing that tech companies pay too
little corporate tax under current rules, and that interim taxes
are necessary until an international agreement is reached.
The U.K., for instance, plans Thursday to publish draft
legislation that would impose its own digital-services tax in 2020
unless an international agreement is reached by then, according to
a person familiar with the matter.
"We've been clear that our strong preference is for a
global/OECD solution," a spokesman for the U.K. Treasury said.
"Once an appropriate global solution is in place, we will no longer
need our own digital services tax."
The OECD's top tax official played down the impact of the spat
between the U.S. and France.
"I am not sure that the escalation of the dispute between the
U.S. and France jeopardizes progress toward a global solution,"
said Pascal Saint-Amans, the OECD's senior tax official. "I would
even think it is the contrary. That said, this is an extraordinary
complex project and it is hard to know how things will evolve."
Write to Sam Schechner at sam.schechner@wsj.com
(END) Dow Jones Newswires
July 11, 2019 06:57 ET (10:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Sep 2023 to Sep 2024