ITIF Welcomes USTR Action to Penalize France’s Digital Services Tax

In response to reports that the United States Trade Representative (USTR) intends to implement tariffs on French products if France moves forward with collecting Digital Services Taxes (DSTs), ITIF’s President Robert Atkinson issued the following statement:

The USTR correctly determined the French DST violate international tax rules. We and many others believe the DST also violate France’s trade agreements. Two reasons make this new announcement necessary. First, the breakdown in talks at the OECD makes it unlikely that this issue can be resolved at the negotiating table. Second, since the beginning of this year a large number of countries have either enacted or at least discussed enacting their own DST. As with the French tax, these measures primarily target U.S. Internet firms.

For more than a century international tax rules have worked to prevent double taxation by requiring a nexus before companies are subject to corporate tax in a country. Meanwhile trade agreements have restricted the right to discriminate against foreign producers. These agreements have brought great benefits to the international community and we cannot allow them to be undone by unilateral measures.

ITIF strongly favors free trade. Unfortunately, it is becoming clear that, absent strong measures from the United States, other nations will increasingly target U.S. companies for higher taxes.

For more analysis of this issue, see:

• Joe Kennedy., “Digital Services Taxes: A Bad Idea Whose Time Should Never Come,” May 2019.
• Joe Kennedy “Testimony to the U.S. Trade Representative on France’s Digital Services Tax,” August 19, 2019.