France And United States Negotiating To Avoid Tariffs
The Governments of France and the United States are reportedly close to settling a dispute surrounding France’s digital services tax.
The US President had said that he intended to announce new tariffs on imports of French wine in response to the newly introduced French DST, which the US Government argued unfairly discriminates against US companies.
The French DST imposes a three percent tax rate on the revenue of digital companies providing advertising services, selling user data for advertising purposes, or performing intermediation services. Companies with global revenues of EUR750m (USD835m) or more and French sales of at least EUR25m are required to pay the tax.
The tax, approved by the French Parliament on July 11, 2019, will to apply to turnover realized in France since January 1, 2019, and is expected to affect around 30 companies supplying digital services in France.
The Office of the US Trade Representative (USTR) revealed recently that it had launched a Section 301 investigation into the new tax. Once the USTR begins a Section 301 investigation, it seeks a negotiated settlement with the foreign country concerned, which could involve either compensation or the elimination of the particular barrier or practice.
However, according to media reports, officials from the French and US Governments at the G7 Summit in Biarritz, France, were negotiating a deal that would see France refunding US companies the difference between their French DST payments and those that would be due under digital tax measures negotiated at OECD level, should the latter be lower.
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