US Labels Digital Tax On Tech Firms As ‘Highly Discriminatory’

The United States has made clear its stance on the recently introduced ‘digital tax’ imposed on companies such as Facebook and Google by the French government.

A senior US treasury official called the move ‘ill conceived’, and highly discriminatory against American businesses.

It comes as other countries look to follow the French move, with both the UK, Italy, Spain and Australia pushing ahead with their own national tax schemes on mostly US-based tech firms.

French tax

France imposed a digital tax on tech giants such as Amazon, Google and Facebook on 1 January 2019.

France’s so-called GAFA tax targets major digital firms and had long been championed by French president Emmanuel Macron as a way to show that governments are capable of taking action to rein in large tech companies, which are seen as paying minimal tax in Europe due to their use of accounting loopholes.

Essentially digital firms often book profits in countries with the lowest taxes (such as Ireland), no matter where the customer is.

Last week French Finance Minister Bruno Le Maire told a French newspaper that the three percent tax could help could yield 500m euros (£568.5m pounds) per year for the French state.

Highly discriminatory

But the United States is not at all happy about the move.

Chip Harter, the US Treasury’s top international tax official, said such taxes were “ill conceived” and it was better to pursue broader international tax reform at the Organisation for Economic Co-operation & Development (OECD).

“The challenges facing the international tax system are just far broader than how to tax social media and search engines,” Harter was quoted by Reuters as telling journalists in Paris before talks at the OECD this week.

“The United States opposes any digital services tax proposals whether they be French or UK,” Harter said.

“What we have seen of the most recent French proposals, we view them as highly discriminatory against US businesses … Various parts of our government are studying whether that discriminatory impact would give us rights under trade agreements, WTO, treaties,” he added.

EU agreement

A number of countries, including the UK, have proposed national digital taxes.

Spain, Italy and Germany for example are considering introducing its own ‘digital tax’ on tech giants.

The European Union meanwhile is seeking to reach an agreement this month to implement a European digital services tax.

France and Germany had envisaged a 3 percent tax on European advertising sales by digital companies, rather than the broad tax on the total revenues of large digital firms originally suggested.

The EU digital tax had been defeated in its previous form, due to opposition by Ireland, Scandinavian countries and Luxembourg. It needs unanimous approval by member states.

The European Union tax was only intended as an interim measure until a consensus was reached by the Organisation for Economic Co-operation and Development (OECD), across the world.

For their part, tech companies have previously defended their tax structures, and insist they abide by tax laws as they’re currently written.

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