On Monday, representatives from Amazon, Facebook, and Google testified at a hearing held by the U.S. Trade Representative’s Office regarding France’s recently instituted three percent tax on specific technology firms. The Trump administration wants to retaliate by levying significant import taxes on French goods. Although President Trump has been a frequent critic of Big Tech, the three companies offered support for his position.
Why Big Tech Oppose the French Tech Tax
At the hearing, Google trade policy counsel Nicholas Bramble argued the new tax unfairly targets foreign tech companies. Similarly, Amazon’s director of tax planning Peter Hiltz said the levy, which was signed into law last week, is a form of “double taxation.” Hiltz also said the tax would hurt the many French small and medium-sized businesses with which it partners.
The Amazon official also noted that despite being France’s second-largest e-commerce company, it couldn’t absorb the new toll. Accordingly, the corporation announced it would raise its sellers’ fees by 3 percent starting on October 1.
The French government’s new tax applies to firms that generate $831 million in annual global revenue and $28 million in local digital sales. Notably, Paris’ tech levy is retroactive and will apply to all income earned in 2019. The European nation instituted the 3 percent fee in hopes of making foreign technology corporations pay their fair share.
Facebook global tax policy head Alan Lee said the tech tax would threaten the social network’s business model. He also argued the French government’s move would stifle “innovation in the digital economy.” According to Statista, Facebook derived 10 percent of its Q4 2018 revenue from Europe.
U.S. Trade Representative Robert Lighthizer will hear public comments regarding the French tech tax until August 26.
The Trump administration and Silicon Valley are likely pushing back against France’s new tax initiative because of its broader implications. Government officials and tech executives have expressed concern that other nations might follow the European republic’s lead. Consequently, tech giants such as Amazon, Facebook, and Google could face significant declines in their overseas revenue.
As it happens, Italy, New Zealand, Spain, and the United Kingdom are all considering instituting new tariffs on Big Tech firms. Peter Hiltz even mentioned this concern indirectly during his testimony. The executive warned that new international trade taxes harm the income of its partner vendors.
The Trump administration has reacted sharply to the threat of the taxes being placed on the American tech sector. At a recent fundraiser, the Commander-in-Chief threatened to levy a 100 percent tariff on French wine.
Additionally, the Office of the United States Trade Representative opened a Section 301 investigation into the possibility that France is targeting American firms with its new taxes. A similar investigation into China’s commerce practices precipitated the current Sino-American trade war.
Furthermore, the Trump administration has received bipartisan support from the Senate to pursue punitive action against France. In April, Senators Chuck Grassley (R-IA) and Ron Wyden (D-OR) wrote a letter to Treasury Secretary Steve Mnuchin in June calling for retaliatory action. The pair suggested the government double the levies it applies to French citizens and corporations operating in the United States.
As such, America may open a new European front in the global trade war before the year ends.