Late last week, CNBC Technology Correspondent Elizabeth Schulze called on Vertex VAT expert Aleksandra Bal to share her insights on France’s legislature granting final approval to a new national tax on digital services.
That approval of what amounts to a 3 percent tax on the digital revenues of large, U.S.-based technology companies was expected, as I explained in March. Somewhat less expected, however, was the fact that France’s legislature voted to approve the new tax less than 24 hours after U.S. Trade Representative Lighthizer released a statement indicating that his office is launching an investigation of France’s digital services tax under Section 301 of the Trade Act of 1974 – which gives the USTR “broad authority” to examine “and respond to a foreign country’s unfair trade practices.”
“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” Lighthizer noted in a prepared statement. “The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”
This back-and-forth relates to a pivotal issue that we’ve discussed before: the extent to which new digital taxation policies are the result of unilateral actions or multilateral actions. Lighthizer’s statement concludes by noting that the U.S. “will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy.”
From a taxpayer perspective, a multilateral approach to creating, implementing and enforcing digital tax policies has many advantages over a unilateral approach. We’re currently examining the implications of these two policymaking approaches on companies and their tax functions, and we’ll share with you what we learn.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
George L. Salis is Principal Economist and Tax Policy Advisor and is also an economist, lawyer, and tax professional with 25+ years of experience in international taxation and trade compliance, tax planning and controversy, fiscal regulation and tax economics consulting. George holds a BSc in economics and political science, an LLB (Honours), an M.A. in legal and ethical studies, and an LLM (Honours) in international tax law.
He also holds a PhD in international law and economic policy and is a Certified Business Economist (NABE). George is the recipient of the Advanced Certificate in EU Law from the Academy of European Law, European University Institute in Florence, and the Executive Certificate in Economic Development from the Harvard Kennedy School of Government.