Amid news reports that officials of the U.S. and French governments have developed a framework to allow France to levy a “digital services tax” primarily targeted at American companies, National Taxpayers Union (NTU) urged the Trump Administration to reaffirm its stance against this dangerous new expansion of taxing power when it meets with French Foreign Minister Bruno Le Maire early next week. NTU President Pete Sepp offered the following statement in advance of that meeting:
“At the G7 Summit earlier this week, French President Emmanuel Macron announced at a news conference with President Trump that the two countries had concluded “a very good agreement” that will give France the green light to levy a 3 percent tax on large companies’ revenues from digital services provided there. In a matter of days, however, the Trump Administration will have the opportunity to send another signal: stop and reverse on this collision course with terrible tax policy.
This unilateral DST would largely attack U.S. tech firms and the people who depend upon them. Like any other tax levied against “big businesses,” the DST will inflict the most damage on everyday people. Citizens and businesses in France who rely on the services provided by U.S.-based companies, as well as the small businesses that are part of the companies’ worldwide supply chains, will suffer in many ways, ranging from higher consumer prices to reduced levels of service. All the while, the evidence that tech is “undertaxed” relative to other industries remains thin as water.
Senate Finance Committee Ranking Member Ron Wyden was spot-on when he warned that the U.S. ‘should reject any deal that allows France and other countries to move ahead with discriminatory taxes on U.S. technology companies, in exchange for vague promises down the line.’ And those promises are indeed vague. President Macron has apparently provided assurances that companies forced to pay the 3 percent tax would be able to deduct it from other tax liabilities, such as those that might result from a larger agreement among OECD nations to fleece firms worldwide. This actually incentivizes France, and other nations developing home-grown digital taxes, to avoid negotiating with OECD partners for that very same larger agreement.
The Tax Cuts and Jobs Act that President Trump signed into law, along with subsequent tax rules for multinational corporations, is already addressing many of the purported concerns about ‘stateless income.’ Our Treasury officials must reiterate this stance now. The U.S. government has more – and better-honed – tools than tariffs at their disposal to stand up for fair tax policy, and should make clear we will defend ourselves from not-so-veiled threats to our taxpayers under the guise of ‘negotiations.’
Revenue-hungry governments around the world are eyeing what the U.S. and France do next for signals that will allow them to prowl for more victims on their own. Here at home, state authorities are also watching events abroad with interest, in the hope they’ll find creative new ways to wield the cross-border tax collection powers recently conferred upon them by the Supreme Court’s Wayfairdecision.
With France’s DST scheduled to begin taking its toll in just a few months, next week’s meeting between Secretary Mnuchin and Minister Le Maire provides an urgent opportunity for the U.S. to take a firm stand against punitive taxes that will harm taxpayers on both sides of the Atlantic.”
For several years NTU has vigorously opposed DST schemes in various forms, and has organized coalition efforts to push back against them. More information can be found here, here, and here.