Amazon, Google, Facebook testify against France’s digital sales tax

Amazon, Facebook and Google say France’s digital services tax will hurt their businesses — and warn it could encourage other countries to adopt similar taxes.

France imposed a 3% tax on global tech companies with at least 750 million euros (US $832 million) in global revenue and digital sales of 25 million euros ($27.7 million) in France.

The United States Trade Representative held a hearing about its investigation into the tax on Monday. Representatives from all three companies were scheduled to testify.

In its written statement ahead of the hearing, Amazon (AMZN) said it has already told its French sellers that certain fees will increase by 3% starting on Oct. 1.

“Due to the highly competitive nature of Amazon’s consumer business, the imposition of the French DST will result in a substantial expense that Amazon cannot absorb if we are to continue making the significant investments in the tools and infrastructure that help fuel our selling partners’ success,” said Peter Hiltz, Amazon’s director of international tax policy and planning.

Hiltz also told USTR the tax could hurt businesses in the U.S. that sell into France.

“Selling partners may be forced to choose between increasing their prices, reducing their own costs, or stop selling entirely. The additional tax could result in lost sales, reductions in investment and output, and potentially even job losses among American SMBs [small- and medium-size businesses],” said Hiltz.

The digital tax is retroactive to Jan. 1, 2019. In its written statement, Facebook (FB) said figuring out how to comply with the tax will be expensive and complicated.

“This will impose a significant burden on Facebook, as there is little guidance on calculating this new type of tax, and our current systems would require a reengineering of our internal systems to capture this data in a way that fully complies with the law as written,” said Alan Lee, Facebook’s head of global tax policy.

Fear that other countries will follow

Google (GOOG) and Amazon expressed concern that other countries could follow France’s lead.

“The establishment of unilateral digital tax measures encourages other countries to enact similar measures, and will likely create a domino effect, leaving businesses with multilayer taxation on the same stream of income. Businesses and governments will have to decipher a complex patchwork of tax measures, which will inhibit international trade and harm the growth of the global economy,” said Hiltz.

France’s finance minister, Bruno Le Maire, defended the tax earlier this year.

“We’re being confronted with the emergence of economic giants that are monopolistic and that not only want to control the maximum amount of data, but also escape fair taxes,” he said. “It’s a question of justice.”

French Finance Minister Bruno Le Maire speaks to the media during a press conference at the finance ministry in Paris, France, Saturday, July 27, 2019. After Trump slammed the "foolishness" of the tax in a tweet Friday and promised reciprocal action, French Finance Minister Bruno Le Maire said "France will implement" it anyway. (AP Photo/Michel Euler)

France isn’t alone — other countries have also announced plans for digital services tax. Critics of the French tax — including Facebook, Amazon and Google — worry it could undermine efforts to develop an international digital tax framework.

“Ultimately, a series of cascading unilateral measures would have dangerous repercussions for the OECD’s [Organisation for Economic Co-operation and Development] multilateral process and for a wide range of U.S. export sectors,” Nicholas Bramble, Google’s trade policy counsel, said in a written statement. “This is a concern for international trade and the wider economy if countries follow the DST model and select specific sectors and groups of foreign companies for targeted tax policies.”

In response to the tax, President Trump has floated the idea of placing tariffs on French wine.

The U.S. Chamber of Commerce submitted a written statement saying the French tax amounts to “de facto discrimination” against U.S. companies. Despite its strong opposition to the tax, the Chamber warned against tariffs on French goods.

“Such action would add to the potential for an escalating trade war with France and the EU and may elicit additional rounds of retaliatory measures that represent a substantial risk to U.S. economic growth and job creation,” said the U.S. Chamber of Commerce in its written statements.

Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

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