Google, Facebook, Amazon to testify in US against French digital tax

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The French Senate approved a 3 per cent levy that will apply to revenue from digital services earned in France by companies with more than €25 million in French revenue and €750 million worldwide, such as Google, Facebook and Amazon. PHOTOS: AFP, REUTERS

WASHINGTON (REUTERS) - Alphabet Inc's Google unit, Facebook Inc and Inc are among the companies that will testify next Monday (Aug 19) at a United States government hearing on the French government's digital services tax.

In July, the French Senate approved a 3 per cent levy that will apply to revenue from digital services earned in France by companies with more than €25 million (S$38.7 million) in French revenue and €750 million worldwide.

The US Trade Representative's (USTR) Office in July opened a probe into the new tax it called "unreasonable".

The office could issue new tariffs on French goods or other trade restrictions after the public comment period closes on Aug 26.

Amazon's international tax policy director Peter Hiltz said in written testimony for the USTR hearing that more than 10,000 French-based small and medium-size businesses are selling on Amazon's online stores and notified them that certain fees will increase by 3 per cent for sales made on starting Oct 1.

He added that "US products and services sold through Amazon's online store in France will cost more as a result" of the tax.

Facebook global tax policy head Alan Lee's testimony said the tax "poses difficulties for Facebook's business model and will hinder growth and innovation in the digital economy" and would require a re-engineering of its systems.

He added that "while we may have the necessary data to calculate the tax, it would require additional time and resources to capture this data and maintain it for these new tax and audit purposes".

Google trade policy counsel Nicholas Bramble said in written testimony that France's tax is "a sharp departure from long-established tax rules and uniquely targets a subset of businesses" and is "likely to generate disputes on whether specific digital activities were 'supplied in France' or in another region".

Ms Jennifer McCloskey, vice-president for policy at Information Technology Industry Council, which represents Amazon, Facebook, Apple, Google and many others, will testify next Monday that the tax "represents a troubling precedent, unnecessarily departs from progress toward stable long-lasting international tax policies and may disproportionately impact US-headquartered companies".

The group added "there is a high likelihood that the cost of the tax will be passed down the supply chain".

A group of companies including Airbnb, Amazon, Expedia Group, Facebook, Google, Microsoft and Twitter said in joint written comments to the USTR that the tax "is unjustifiable in that it infringes international agreements, and unreasonable in that it is discriminatory, retroactive and inconsistent with international tax policy principles".

Last month, US President Donald Trump threatened to tax French wines over the tax. The White House has said that "France's unilateral measure appears to target innovative US technology firms that provide services in distinct sectors of the economy".

Other European Union countries, including Austria, Britain, Spain and Italy, have also announced plans for their own digital taxes.

They say a levy is needed because big, multinational Internet companies such as Facebook and Amazon book profits in low-tax countries like Ireland, no matter where the revenue originates.

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