The US Trade Representative (USTR), Robert Lighthizer, issued a “notice of action” on Friday 10 July confirming his intention to impose targeted tariffs on imports from France in 6 months’ time in response to the national tax on digital giants’ turnover.
The French tax targets platforms whose digital activities generate more than 750 million euros worldwide. Believing the United States to be discriminated against, the USTR initiated a year ago a Section 301 investigation, which concluded in December 2019 that sanctions were appropriate (see EUROPE 12294/10, 12385/7, 12382/20).
On 10 July, France learned that its exports of beauty and luxury goods, worth US$1.8 billion, would be subject to additional tariffs of 25% by 6 January 2021. A new 6-month deadline for the implementation of sanctions has been granted to allow more time for bilateral and multilateral discussions.
Status quo?
This period seems to have reassured the Commission, which is taking into account the following considerations: “The US announcement makes it clear that these actions will not be implemented immediately”. “The United States already announced trade measures earlier this year, which have not yet been implemented. The announcement therefore does not seem to change the status quo”, its spokesperson told EUROPE on Monday 13 July.
Fair taxation of the digital economy is a priority for the EU, the spokesperson said. “We remain committed to ensuring that all businesses, including digital businesses, pay their fair share of taxes where they are legitimately due”, the spokesperson added, noting that “this is particularly important as the global economy recovers from the coronavirus pandemic”.
Intimidation strategy
Many observers, including MEP Bernd Lange (S&D, Germany), believe that these actions are intended to intimidate in the run-up to the US election.
“This US reaction is part of the usual pattern of the Trump administration to intimidate the EU and its Member States and thereby abuse WTO rules, which they no longer adhere to”, the chairman of the Committee on International Trade (INTA) told EUROPE.
For the time being, Paris does not seem to be impressed by the American measures. “In any case, if there was no international solution by the end of 2020 [...], we would apply our national tax in France (which was already collected in 2019) as, moreover, do many other European States”, indicated a source close to Bruno Le Maire, French Minister of Economy and Finance.
A global solution is the most important
“We urge the United States to return to the OECD negotiating table”, stated the European Commission. It also added that: “We will continue to press for an ambitious global approach to digital taxation and stand ready to present a new proposal at EU level, should the OECD discussions fail” (see EUROPE 12518/21).
A source close to Bruno Le Maire also made a similar remark: “We call on the United States to continue the negotiations at the OECD [...], knowing that a very large majority of OECD States are in favour of the proposal on the table”.
Indeed, many stakeholders and observers, such as Mr Lange, believe that only a global solution would be optimal. “I don’t know if such national solutions are really effective at this stage”, he added.
New own resource?
The chairman of the INTA committee also recalled that “if no global solution is found by the end of 2020, the EU will launch its own common EU-wide digital tax”, which “could also be an important new own resource for the EU budget in the future”.
But this European tax project is already under investigation in the United States (see EUROPE 12497/28).
See Mr Lighthizer’s opinion: https://bit.ly/3fsc4FN (Original version in French by Hermine Donceel, with Marion Fontana)