August 12, 2019

WASHINGTON –Today, ITI, the global voice of the tech sector, outlined key concerns regarding France’s digital services tax and called for multilateral cooperation to address changes to the international tax system.

In comments submitted to the U.S. Trade Representative (USTR) ahead of its hearing on its Section 301 investigation into the Government of France’s Digital Services Tax, ITI, which comprises the top innovation companies from all corners of the technology sector and beyond, underscored the potential harm of widescale application of unilateral taxes and reiterated its call for countries to commit to the ongoing, multilateral Organisation for Economic Co-operation and Development (OECD) process.

“France’s unilateral digital services tax could create a troubling precedent and departs from important multilateral progress toward stable, long-lasting international tax policies,” wrote ITI. “While we support the U.S. Trade Representative's efforts to fully investigate the trade implications of France’s unilateral action, our ultimate goal is an outcome in which all parties commit to a multilateral solution on appropriate international income tax reforms. We encourage countries to work together to achieve workable solutions, and we offer our comments in that spirit.”

The comments come as Jennifer McCloskey, ITI’s Vice President of Policy, prepares to testify on behalf of ITI at USTR’s hearing on August 19.

In its comments, ITI identified several key concerns with the French measure, including:

  • The limited range of business activities in scope. The narrow focus on a subset of digital companies appears designed to single out a small number of companies, and a fraction of business models, that would be affected by the new tax.

  • The applicable revenue thresholds. The French tax includes two revenue thresholds, which serve to limit its scope to a small subset of the largest digitized companies, and as a result may disproportionately impact U.S.-headquartered companies.

  • The likelihood of global tax policy fragmentation. The imposition of individual country, gross revenue-based measures targeting different subsets of an undefinable “digital economy” will give rise to a complex and convoluted patchwork approach to international taxation.

Public Policy Tags: Tax Policy