Silicon Valley technology giant Tucao digital service tax urges Trump not to retaliate with tariffs.
France will not give in, and technology companies don’t want to tear their faces.
On the 19th, local time, at the hearing of "301 Investigation" on French digital services held by the Office of the United States Trade Representative (USTR), GAFA (acronym for Google, Apple, Facebook and Amazon) called on France to cancel its digital service tax (DST) plan, calling it a "unilateral and discriminatory attack", and said that the introduction of the tax would greatly increase the operating costs of enterprises.
However, a report by Deloitte showed that if the French digital service tax is introduced, consumers will bear the biggest cost, and the platform operators themselves will bear only 5% of the rising cost.
In fact, the biggest concern of all the participants is that if France insists on the final approval of the digital service tax, then other countries will follow this tax model, which will effectively hit the development of the US technology industry.
However, several experts interviewed by China Business News believe that France will still insist on introducing the digital service tax and will not compromise.
Su Qingyi, deputy director and associate researcher of the International Trade Research Office of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, told the First Financial Reporter that France would not give in easily on the issue of digital tax. "Before the United States put pressure on France, France still passed this draft law. Obviously, American pressure is useless." He said.
It is worth noting that at the hearing, on the one hand, Silicon Valley giants urged the United States and France to resolve this tax dispute as soon as possible, on the other hand, they also advised the Trump administration not to retaliate by means of tariffs.
French taxation will set a disturbing precedent.
According to the text submitted in advance by the participating enterprises and organizations seen by the First Financial Reporter, it is unanimously agreed that the digital service tax introduced by France will set a "disturbing precedent".
"Today’s hearing is not only about the French digital service tax, but also about how to prevent the unilateral large-scale introduction of consumption tax." Washington-based lobbying organization — — Jennifer McCloskey, vice president of policy of the Information Technology Industry Council of the United States, pointed out at the hearing.
On July 11th, the French Senate voted to pass the bill of digital tax. According to this bill, the global digital business annual revenue exceeds 750 million euros, and enterprises with annual revenue exceeding 25 million euros in France will be subject to 3% digital tax. The bill has yet to be signed by French President Macron.
The reason is that technology giants have long benefited from the current European tax system, and tax reform is imperative. However, due to internal contradictions in the European Union, the unified standards were delayed, and the negotiations under the OECD were even slower. In this case, the French government decided to take the lead.
At present, in addition to foreign countries, Austria, Britain, Spain and Italy have also announced plans to levy digital taxes. Among them, the British government has also published a draft tax on science and technology services with a tax rate of 2%. Faced with such intensive steps, the Silicon Valley giants are deeply uneasy.
At present, French information shows that there are a total of 30 enterprises involved in the collection of science and technology service tax in France, mainly involving American technology giants such as Google’s parent company Alphabet, Apple, Facebook and Amazon, but also involving enterprises from Germany, Spain and the United Kingdom. At the same time, it will also involve a French online advertising platform Criteo.
This tax mainly charges for two kinds of behaviors: first, in terms of online transactions, the French side will tax the transactions completed by users in France, such as the purchase behavior on Amazon.fr, or the paying account opening behavior in France (such as using Amazon Prime service). Second, tax users’ advertisements located in France.
For Amazon, France represents its second largest e-commerce market in Europe. At the hearing, shields, head of Amazon’s tax planning, pointed out that the French move might be suspected of double taxation.
He said that at present, about 58% of Amazon’s sales come from partner companies. If the digital service tax is introduced, these companies will be hit hard, and the tax will "have a negative impact on Amazon and thousands of small and medium-sized enterprises".
However, "Amazon can’t afford this." Shields also took this opportunity to reiterate Amazon’s decision. "The company has informed its partners that their fees will increase from October 1."
According to French media reports, Amazon France has confirmed that the company plans to pass on the digital service tax to French enterprises that use its retail platform for sales, and will levy a certain amount of commission on these French enterprises.
"What France wants to collect is actually the value-added tax related to the place of registration." Zhao Yongsheng, director of the French Center for Economic Research in university of international business and economics and professor of finance, said in an interview with the First Financial Reporter that "France has actually proposed some targeted measures, which are more obvious to Amazon."
Zhao Yongsheng explained: "For example, Amazon itself has no freight, but France is afraid that its enterprises are not competitive, so it is illegal for the European Union to pass a law stipulating that online stores have no freight, so now the invoices for goods purchased from Amazon in France will show that it has received a freight of 0.01 euros."
However, as mentioned above, Deloitte pointed out in an analysis report that if a digital service tax is levied, the additional cost paid by technology enterprises is not much, around 5%, while the consumer will bear the biggest cost, at 55%, and the remaining 45% will be borne by enterprises using the technology platform, such as advertisers.
Trump threatens tariff retaliation, technology companies: please don’t.
The above hearing is part of the investigation procedure of "301" digital service tax law initiated by USTR against France, which is the first time that the United States has targeted its western allies in decades.
USTR gave three reasons for launching the "301 investigation" against France: First, France wants to introduce the technology service tax for large American technology companies. Therefore, the first major problem of the science and technology service tax is discriminatory.
Secondly, there is something wrong with the retrospective principle of digital service tax. According to French regulations, the science and technology service tax will be retroactive to January 1, 2019. This function makes people question its fairness.
At the hearing, many technology companies also agreed with this view. Alan Lee, a participant from Facebook, said that this form of taxes dating back to 2019 had never been seen before.
Thirdly, the French science and technology service tax deviates from the norms reflected in the American tax system and the international tax system in several aspects, among which the obvious deviation includes: the extraterritorial jurisdiction is not taken into account.
At the hearing, usually the hearing party will ask the enterprises attending the hearing to "offer suggestions" for what actions should be taken. At the meeting, we can see the ambivalence of the technology giants: despite repeated complaints, the GAFA giants in the United States do not want the Trump administration to impose punitive tariffs on the EU.
"We support the U.S. government’s efforts in investigating these complex trade issues, but urge the U.S. government to conduct it in the spirit of international cooperation ‘ 301’ Investigation, do not use tariffs as a remedy. " Mccloskey pointed out at the meeting.
At the end of July, US President Trump threatened that if France imposed a digital service tax, the United States would take retaliatory measures, including imposing tariffs on French wines.
The Atlantic Council of the United States pointed out in a report that the products that the United States may take tariff retaliation will involve wine, cheese and perfume.
According to data from the French Federation of Wine and Spirits Exporters, France exported 3.2 billion euros of wine to the United States in 2018, and the United States is currently the largest export market for French wine.
In this regard, French Finance Minister lemerre previously responded that France’s levy of digital service tax is not aimed at American enterprises, and hopes that the United States will not confuse digital service tax with the imposition of tariffs on French wines.
Lemerre pointed out that he hoped that the leaders of France and the United States could reach an agreement on the digital service tax before the Group of Seven (G7) summit in late August.
Zhao Yongsheng, who is doing academic research in the field of international financial cooperation in France, believes that it is difficult for countries to reach an agreement on the issue of digital tax at this G7 meeting: "The economic types of Britain, the United States and continental Europe are different. The former is based on the market, while the latter is based on consortia. It is difficult to unify one by the market and the other by the government. On the one hand, a large number of European headquarters of technology companies are registered in Ireland, but Ireland does not belong to G7 Group. Moreover, the French digital economy itself is not developed, and the digital tax is more targeted at the United States. However, the United States has already expressed dissatisfaction before, and Macron does not want this G7 to break up. "