ITIF Welcomes USTR Decision Against France’s Digital Services Tax

WASHINGTON—In response to the announcement from the United States Trade Representative (USTR) that France’s Digital Services Tax violates its tax obligations under Section 301 of the Trade Act of 1974, the Information Technology and Innovation Foundation (ITIF), the world’s leading think tank for science and technology policy, released the following statement from ITIF Senior Fellow Joe Kennedy:

The United States Trade Representative is right to conclude that France’s Digital Services Tax violates its trade obligations to the United States. Digital Services Taxes are unilateral actions that violate the spirit of multilateral agreements and bilateral treaties regarding which countries can tax multinational corporations. France’s Digital Services Tax is narrowly and inappropriately targeted to raise revenue only from the largest companies in a small set of industries, many of them American. These companies are already subject to tax in the United States and in other countries where they add economic value. The decision to tax revenues rather than profits skirts France’s tax treaties with the United States and raises the prospect of double taxation. The imposition of what is essentially a fixed tax on the market value of an imported good amounts to an illegal tariff.

The administration needs to defend U.S. interests forcefully. At least half a dozen countries, including the United Kingdom and Canada, are considering similar measures. Doing nothing would signal to other countries that they can follow France’s lead and enact their own illegal, unilateral measures. It would also jeopardize ongoing negotiations within the Organization for Economic Cooperation and Development on changes to international tax treaties. The administration needs to work within this framework to find agreement on changes in international corporate law that would restore multilateral support without adding greater complexity or subjecting corporations to double taxation.

For additional background:

• ITIF’s Testimony to the U.S. Trade Representative on France’s Digital Services Tax.
• ITIF’s Report on Digital Services Taxes: A Bad Idea Whose Time Should Never Come