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U.S. Trade Representative Robert Lighthizer described the precedent-setting tax as “unreasonable,” yet several other countries are considering similar unilateral levies.
Digital service providers argue government regulation of marketplace services needs modernization, but the current taxes pressure companies unfairly and will hurt small business that trade on their platforms, ultimately transferring costs to consumers.
The French Senate approved a 3 percent levy in July that would apply to digital services revenue earned in France by companies with more than 25 million euros in French revenue and 750 million euros ($838 million) worldwide.
Amazon retaliated by raising seller fees by 3 percent for thousands of small and medium-sized businesses in France from the tax. However, France and governments considering digital taxes like the UK, Spain, Austria, and Italy claim the levies are intended to equalize opportunities for small businesses and big tech.
The U.S. Trade office opened the French tariffs and other trade restrictions up for public comment until Aug. 26, just before the G-7 summit in Biarritz, France.
The Trump administration clapped back, threatening retaliatory tariffs on signature French wine, arguing the tax “unfairly targets American companies” and resulting in higher prices for consumers.
In a written testimony, Jennifer McCloskey, vice president for policy at Information Technology Industry Council representing Amazon, Facebook, Apple, Google and the others, echoed the president’s sentiments saying the “represents a troubling precedent, unnecessarily departs from progress toward stable long-lasting international tax policies and may disproportionately impact U.S.-headquartered companies.”
Many of the tech behemoths presented written testimonies contesting the tax for the hearing.
In a recent statement from the Google's vice president of government affairs and public policy, Karan Bhatia supported modernization of digital regulation to maintain the communities where they work. However, Bhatia said a comprehensive multilateral approach would reflect fair business practices.
"We hope governments can develop a consensus around a new framework for fair taxation, giving companies operating around the world clear rules that promote a sensible business investment," Bhatia said, "That kind of race to the bottom would create new barriers to trade, slow cross-border investment, and hamper economic growth."