07/01/20

EU: Ready to Retaliate if US Imposes Tariff over Digital Tax.

As published on tech.newstatesman.com, Monday January 6, 2020.

The EU will hit back at the US if it levies sanctions on French goods as a punishment for the country’s digital tax, France’s economy minister has warned.

The intervention comes just weeks after the Trump administration threatened to impose 100 per cent tariffs on $2.4bn (£1.85bn) of French imports.

In a bid to preempt such a move, Bruno Le Maire has written to US trade representative Robert Lighthizer to warn that the proposed retaliation would “deeply and durably affect the transatlantic relationship at a time when we need to stand united”.

In further remarks made on French radio on Monday (6 January), Le Maire added that “if the Americans decide to go ahead and impose sanctions against the digital tax … in this case we would retaliate”. He has told Lighthizer he has been in touch with the European Commission and other member states, and that they are considering their options.

The US federal tax office has described the fiscal regime, which taxes tech companies’ revenues rather than their profits, as “inconsistent with prevailing principles of international tax policy” and “unusually burdensome for affected US companies”. But Le Maire denied that the tax system was specifically aimed at US tech firms.

As part of an attempt to appease the US, France has also offered to backdate any refunds owed to tech companies that have been overcharged due to discrepancies between the French and OECD regimes.

In September, the European Commission announced that it would give the OECD until January 2021 to reach a global agreement on how to tax tech firms. “If no effective agreement can be reached by the end of 2020, the EU should be willing to act alone,” said antitrust chief Margrethe Vestager at the time.

Despite the threat of US retaliation, the UK government announced in July that it was pressing ahead with plans to introduce a new two per cent tax on tech companies’ revenues. It is likely that the US will withhold support for a trade deal with the UK unless it promises to drop the plans.