US suspends French tariffs over digital services tax

Platform Economy: The technology sector in Paris, France

The United States has said it might hold off slapping tariffs on French cosmetics, handbags and other imports in retaliation for a digital services tax Washington says will damage US tech companies, although it investigates similar taxes elsewhere.

The US Trade Representative’s office (USTR) said the 25% tariffs on imports of the French goods, which can be valued at around $1.3 billion yearly and were due to go into effect on Wednesday, would be suspended forever.

Washington had declared the tariffs in July after a US analysis showed a French digital services tax (DST) unfairly singled out US firms such as Google, Facebook, Apple, and Amazon.

France and other nations view digital support taxes as a way to boost revenue from the regional operations of major tech companies that they say profit enormously from local markets while making only limited contributions to public coffers.

USTR said suspending the action against France would allow Washington to pursue a coordinated response in 10 investigations into similar taxes in India, Italy, the UK and other nations. It gave no timeframe for more action.

European leaders and business groups welcomed the news, saying it would allow more time for talks on a global taxation solution to bear fruit.

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French Finance Minister Bruno Le Maire said the tariffs would not have been “legitimate” under WTO rules in any situation and redoubled his phone for a global solution.

“Trade disputes between the United States and Europe… will only make losers, particularly during this time of crisis,” he explained.

EU Trade Commissioner Valdis Dombrovskis highlighted Brussels’s openness to work on a worldwide solution for fair taxation of this industry.

“The EU stands ready to explore all options should the US unilaterally apply these trade measures,” he explained.

The reprieve gives President-elect Joe Biden and his nominee as commerce czar, Katherine Tai, time to operate with France and other countries to discover a viable solution, stated Coalition of Services Industries.

CSI President Christine Bliss also advocated France and other countries named from the USTR investigation to suspend imposition of DSTs and continue working toward a remedy.

Almost 140 countries involved in discussions agreed in October to keep negotiating before mid-2021 after discussions stalled as Washington became unwilling to register to an international deal before the US presidential election.

The USTR on Wednesday said it had discovered that digital services taxes embraced by India, Italy and Turkey also discriminated against US businesses and were inconsistent with international tax principles, but held off on announcing any specific tariff actions.

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The probes are one of several active USTR probes which could cause tariffs before President Donald J Trump leaves office or early in the Biden government.

The team at Platform Executive hope you have enjoyed the ‘US suspends French tariffs over digital services tax‘ article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Andrea Shalal. Additional reporting by Philip Blenkinsop in Brussels and Leigh Thomas, Dominique Vidalon in Paris. Editing by Steve Orlofsky and Grant McCool.

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