The U.S. Trade Representative (USTR) has initiated a Section 301 investigation regarding the Digital Services Tax (DST) proposed by the French government, which would impose a three percent additional tax on certain companies providing certain digital services to French users. Unlike other recent Section 301 investigations, such as the investigation into European Union subsidies for large civil aircraft or the investigation into Chinese intellectual property and technology transfer practices, the Section 301 investigation of the DST does not contemplate duties on French imports at this time. Instead, the USTR will determine the appropriate response if it determines that the DST is actionable under Section 301.
The interagency Section 301 Committee seeks public comments on the proposed duties and will hold a public hearing. The Committee has set the following deadlines:
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August 12, 2019: Due date for submission of requests to appear at the public hearing and written testimony.
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August 19, 2019: Due date for submission of written comments.
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August 19, 2019: The 301 Committee will convene a public hearing at 9:30 a.m. in Rooms 1 and 2, 1724 F Street NW, Washington, DC 20508.
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August 26, 2019: Due date for submission of post-hearing rebuttal comments.
USTR identifies the following characteristics of the DST that will be the focal points of the investigation:
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Revenue thresholds in the DST proposal effectively target large U.S.-based companies rather than small French companies (the DST affects companies with a global revenue of €750 million or more, €25 million or more of which must be earned in France).
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The DST, as currently proposed, would be retroactive to January 1, 2019.
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The DST, as currently proposed, is inconsistent with U.S. and international tax norms in that it is extraterritorial, taxes revenue instead of income, and is intended to penalize specific companies “for their commercial success.”
USTR invites comments with respect to any aspect of the proposed action, including the following:
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Concerns with the French digital services tax, as set out in the joint committee bill or as subsequently modified or adopted by the Government of France, including the specific concerns identified above
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Whether the French DST is unreasonable or discriminatory
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The extent to which the French DST burdens or restricts U.S. commerce
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Whether the French DST is inconsistent with France’s obligations under the WTO Agreement or any other international agreement
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The determinations required under section 304 of the Trade Act, including what action, if any, should be taken
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