Tech Hails USTR Finding That French DST Discriminates Against US Companies

The French DST “is harmful to the digital economy and leaves many U.S. technology companies footing the bill,” said CTA President Gary Shapiro. “The path to success is by developing unicorns, not penalizing America's most successful companies. We support the USTR's investigation and hope we can continue to address digital tax challenges in order to keep our vibrant sector competitive."

CompTIA backs the Trump administration’s efforts to “curb” France's DST, said Cinnamon Rogers, executive vice president-advocacy: “This discriminatory tax targets many of the world’s most innovative companies by taxing their profits twice and will ultimately harm job and economic growth in France and elsewhere.”

The Information Technology Industry Council hails USTR for proposing “a strong trade response” if the DST remains, said Vice President-Policy Jennifer McCloskey. “We hope to avoid this outcome.” ITI urges the U.S., France “and all participating governments to focus on a successful and lasting tax policy resolution” through the Organisation for Economic Cooperation and Development, she said.

USTR's report “sends a strong signal to France, and has alerted other countries finalizing similar measures that discriminatory taxes will not be tolerated,” said Matt Schruers, Computer & Communications Industry Association chief operating officer: “USTR's action shows how important the ongoing OECD process is. Countries bypassing the multilateral process” with unilateral DSTs “proceed at their peril.”

France’s DST typifies “unilateral actions that violate the spirit of multilateral agreements and bilateral treaties regarding which countries can tax multinational corporations,” said Joe Kennedy of the Information Technology and Innovation Foundation. The DST “is narrowly and inappropriately targeted to raise revenue only from the largest companies in a small set of industries, many of them American,” said Kennedy. “The imposition of what is essentially a fixed tax on the market value of an imported good amounts to an illegal tariff.”

The U.S. Chamber of Commerce “strongly opposes France’s DST, which discriminates against U.S. companies,” said Marjorie Chorlins, senior vice president-European affairs. “The path forward is for all parties to redouble efforts to devise a multilateral solution to the tax challenges posed by digitalization of the global economy in the negotiations now underway at the OECD.”

Twelve of the 21 companies facing exposure to the DST’s “digital interface segment” are U.S.-based, said USTR’s report. “No other country has more than three companies” with DST exposure, including no French companies, it said. “The DST targets U.S. companies by applying only to a business model where U.S. companies are unusually successful.”

The DST covers sales of goods or services “where the company operating the digital interface does not itself own or provide the good or service,” said the report. “This distinction has the effect of excluding French companies from the scope of the DST while covering their U.S.-based competitors.”

USTR found eight of the nine companies with exposure to the DST’s digital advertising component are America-based. “French policymakers expected and desired this outcome,” it said. U.S. companies are “highly successful” in the internet ad sector in France, it said. The DST doesn't apply to “related sectors such as traditional advertising, where French companies are more successful,” it said. “The DST targets U.S. companies by applying only to a type of advertising where U.S. companies are particularly successful.”

Requests to testify at a Jan. 7 public hearing on the proposed tariffs on French imports are due Dec. 30. Post-hearing rebuttal comments are due Jan. 14.