US Could Push for 100% Tariffs on French Products Over Digital Tax

By IndraStra Global News Team

By IndraStra Global News Team

Image Attribute: The Eiffel Tower in Paris, France / Source: Pixabay.com

According to an Office of U.S. Trade Representatives’ (USTR) report released just hours before President Donald Trump is scheduled to meet with French President Emmanuel Macron in London, the U.S. is preparing tariffs on US$ 2.4 billion worth of French exports as retaliation against the country's new digital services tax.

It is speculated, the tariffs of as much as 100% (which will include cheese, sparkling wine/champagne, make-up, handbags, etc.) are under consideration because France’s digital services tax discriminates against the U.S. companies such as Google, Apple, Facebook, and Amazon.

US Trade Representative (USTR) Ambassador Robert Lighthizer, says the decision "sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies".

France’s digital services tax has been a flashpoint between France and the U.S. since it was approved by President Macron on July 24, 2019 (later published in the official gazette on July 25, 2019). The digital services tax is imposed at a rate of 3% on the gross revenues derived from digital activities of which French “users” are deemed to play a major role in value creation. The law not only affects digital companies but, more generally, digital business models.

The French digital services tax will be levied on two types of digital services (only):

• The provision of a digital interface enabling users to enter into contracts and to interact with others (“intermediary services”). There is a list of excluded services such as, for example, the supply of digital content, communication services, and qualifying payment services in the meaning of Article L. 314-1 of the French Monetary and Financial Code.

• The provision of services to advertisers that aim at placing targeted advertising messages on a digital interface based on data collected about users and generated upon the consultation of such interface. The purchase and storage of advertising messages, advertising monitoring, and performance measurement, as well as the management and transmission of user data also fall within this category (“advertising services based on users’ data”). Advertising services on a digital interface that are not targeted based on user’s data are de facto tax-exempt. 

Kindly do note, for each of these two types of services, a specific set of rules applies (notably territoriality rules) to attract the related value creation by French users.

Also, kindly do note the following two thresholds → the 3%  levy would be placed on yearly revenues of companies that provide services in France and have global revenues of at least US$ 28 million (€25 million) in France and  US$ 837 million (€750 million) worldwide every year.