Washington, D.C., July 17, 2019 – Responding to the recent announcement by France to implement a digital service taxes (DST), the United States Council for International Business (USCIB), which represents America’s most successful global companies, urges countries to avoid unilateral measures and instead pursue a consensus-based, comprehensive and income tax-based solution. USCIB supports the OECD Inclusive Framework process for reaching agreement on these global issues.
The French law will impose a tax of three percent on certain revenue earned by technology companies including advertising, commissions from digital marketplaces and sales of data.
“Taxes on revenues are distortive,” said USCIB Vice President for Tax Policy Carol Doran Klein. “The total tax may exceed company profit and misallocate profits to the market jurisdiction. Any solution should be treaty compliant and designed to avoid controversy. It should tax income based on where value is created by companies, including appropriate recognition of where intangibles are created. Furthermore, any solution should not discourage innovation.”
Klein also warned that the French tax will not be easy to implement and will put a significant burden on companies to set up systems to track global revenues. “Implementing such new systems would be both time consuming and expensive – not simple or easily implemented – and would divert company resources from useful profit-making activities.”
“It is unfortunate that France has decided to repeat the mistakes identified in the debate over the unsuccessful EU DST,” said Bill Sample, chair of USCIB’s Tax Committee. “I urge France to focus their energies on reaching a consensus solution within the OECD’s Inclusive Framework for a sustainable international tax system that recognizes innovation and production and minimizes the adverse impact of the costs of double taxation on business investment and growth.”
USCIB reiterated its concerns in a letter to the government of New Zealand, which is also looking at options for taxing the digital economy.
USCIB promotes open markets, competitiveness and innovation, sustainable development and corporate responsibility, supported by international engagement and regulatory coherence. Its members include U.S.-based global companies and professional services firms from every sector of our economy, with operations in every region of the world, generating $5 trillion in annual revenues and employing over 11 million people worldwide. As the U.S. affiliate of the International Chamber of Commerce, the International Organization of Employers and Business at OECD, USCIB provides business views to policy makers and regulatory authorities worldwide, and works to facilitate international trade and investment. More at www.uscib.org.
Jonathan Huneke, USCIB
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