The hearing came after the United States Trade Representative (USTR) launched a probe into France's digital taxes last month, arguing that the French digital service tax, which imposes a 3 percent tax on the annual revenues of mostly American companies, is “discriminatory or unreasonable and burdens or restricts United States commerce.”
"Our members are highly concerned with the discriminatory nature of the French government’s DST specifically against successful American companies […]Tax requirements will disproportionately harm some of the most successful global enterprises based in the US," said Stephanie Holland, vice president of federal and global policy with CompTIA, a trade group representing the tech industry.
The investigation is carried out under Section 301 of the Trade Act of 1974, which allows the White House to retaliate against trading partners, and could last for up to a year, a USTR spokeswoman told The Hill. After the Monday hearings, the investigators will look into the evidence around the allegations and comb through public comments on the digital tax law, coming up with a report. The report might follow the example of another USTR report on Chinese practices and become the basis for US retaliatory measures.
Google's trade policy counsel, Nicholas Bramble, warned that the company is facing the "pretty serious challenge of reengineering our systems" in light of the tax, while Alan Lee, Facebook's head of global tax policy, said that they “expect additional tax compliance, audit, engineering and maintenance costs.”
Amazon's director of international tax policy, Peter Hiltz, predicted it could cost the retail giant millions of dollars “to write the systems to collect the data in the first place.” Hiltz noted that Amazon does not collect the kind of data the law requires to assess how much companies should pay.
Hiltz added the taxes will raise costs for the small- to medium-sized businesses that sell their products on Amazon's online marketplace, raising the possibility that consumers could take a hit as well. Amazon announced it is raising seller fees to accommodate the new digital tax.
Officials from the Department of Commerce, State Department, Department of Homeland Security and others asked the companies to describe how "unusual" the law is.
Matthew Schurers, the chief operating officer of the Computer and Communications Industry Association, accused France of "gerry-mandering" or "ring-fencing" around US exporters. Schurers said the French digital services tax and other "unilateral measures" could "threaten to undermine multilateral progress we’ve seen at the Organization for Economic Cooperation and Development (OECD)."
OECD, an intergovernmental economic organization, is currently negotiating over how to update tax law to account for the digital landscape. The companies and trade groups threw their support behind the OECD process, saying the French digital taxes should not go into place before those negotiations result in action.
