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US opened an investigation into French digital tax on tech giants

Will the US manage to Ban French GAFA tax?

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Is the French GAFA tax likely to disappear? According to the French newspaper Les Echos, the US government may push in that direction. 

While the White House threatened France with similar sanctions currently imposed on China, US Trade Representative Robert Lighthizer announced the opening of an investigation called “Section 301”, which could change or even cancel the legislation. 

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The GAFA tax, which forces Silicon Valley giants to pay up to 3% of taxes on their activities generated in France has already been applied since January 1st. As the regulation has become very popular in France, it has inspired the European parliament to pass a similar law.

The United States are “very concerned”

“The United States are very concerned that the GAFA tax unfairly targets American companies,” said US Trade Representative Robert Lighthizer in a press release confirming the opening of the so-called Section 301 investigation.

The survey, which started in early June, could last up to a year. According to Les Echos, it “aims to determine the fairness of commercial practices with regard to US companies”.

The purpose is to examine “the effects of this legislation and determine whether it is discriminatory or unreasonable or whether it constitutes a burden or a restriction of US trade,” said Lighthizer.

What Section 301 entails

Ordered by US President Donald Trump, the investigation into Section 301 will have to follow well-defined specifications by the US Chamber of Commerce.

As recalled by Nouvel Observateur, “Section 301 gives the Trade Representative the general power to investigate and respond to unfair trade practices in a foreign country”.

If the United States suspects France of unfair commercial practices, the experts have already succeeded in demonstrating that the law concerns no less than 26 French companies, such as Criteo, Leboncoin, or Meetic, but also the Japanese Rakuten and the Norwegian Schibsted.

France to prevail an agreement with the US

For Bruno Mayor, who led the campaign GAFA law, the French initiative aims to pass a law on a European scale.

“I want to reiterate to our American partners that it must be an incentive for them to accelerate further work on an international solution for digital taxation across the OECD”, said the Minister of Economy.

Read on Alvexo: “Hundreds of Companies against Increased Tariffs”

The Minister added that the G7 Finance Ministers will meet all weekend in Chantilly, suburbs of Paris to discuss the GAFA tax among others.

As a reminder, the GAFA tax targets digital companies, whose turnover represents at least €750 million worldwide and at least €25 million on French soil. If the law is maintained, the GAFA tax would represent a gain of €500 million just for 2019.

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Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.