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Daily Tax Report: International

French Companies Urge U.S. to Stop Trade Probe on Digital Tax

Aug. 7, 2019, 3:27 PM

French companies urged the U.S. to wait for global agreement on digital taxation—or turn to diplomatic or WTO negotiations to resolve the dispute—instead of going ahead with its trade investigation into France’s new digital services tax.

The U.S. Trade Representative should postpone its trade investigation into possible distortive impacts of the French DST until ongoing G-20 and OECD negotiations “have resulted in a satisfactory outcome,” the Association of Large French Companies (AFEP) said in a letter released Aug. 7.

The U.S. opened an investigation under Section 301 of the Trade Act into France’s new digital services tax, which targets 3% of large tech companies’ revenue from digital activities. The U.S. administration has said the tax appears to discriminate against U.S. companies. AFEP said if the U.S. doesn’t stop the investigation, it could negotiate with France and the European Union on a compromise or try to resolve the dispute within the World Trade Organization.

The Organization for Economic Cooperation and Development is working on an overhaul of global tax rules to address the concerns of countries including France that tech multinationals aren’t being taxed enough in the markets where their users are located. The French government said it would remove its tax once an international solution is in place.

The letter urged the U.S. to see if a Group of Seven summit in France later this month can produce an agreement on the OECD’s plan—which would “pave the way” for the Group of 20 to agree on a solution next year.

AFEP represents 120 large companies operating in France, including Airbus, Sanofi, and Societe Generale.

To contact the reporter on this story: Isabel Gottlieb in Washington at igottlieb@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com