What’s just happened?

During 2020, the USA found itself in the middle of a tax war with France. This was in response to Macron placing a “3% levy on all revenue earned from digital services used in France.”[1] Branded as the dreaded ‘tech tax’, this naturally had a huge impact on tech giants such as Facebook Inc, Amazon Inc and, of course, Google.

In retaliation, the Trump administration decided to action a controversial tax on all French goods being imported into the United States, including anything from clothing to cosmetics. [2] After US trade representatives confirmed that they had plans to raise the import tariffs of champagne and cheese by 100%, this meant war.

What does this mean?

Much like anything that happened in 2020, the decision Macron made to place a ‘tech tax’ on the largest tech firms used throughout France, was a result of the Coronavirus pandemic. Victor Mallet for the Financial Times explained that French trade representatives found it “paramount” to introduce this tax as “big tech companies have been the big winners of the pandemic” with more people shopping online, communicating and streaming content, than ever before. [3] [4]

The decision to impose this ‘tech tax’ on the digital services used in France came as a shock to Washington. However, when scrutinised, the tax is only to be applied to those tech giants who generate over €25 million revenue within France, and have a global revenue that exceeds €750 million. Nevertheless, by November 2020, the US was still yet to pay out their ‘tech tax.’[5]

From December 2020, French officials began to contact tech firms such as Facebook and Amazon to claim accumulatively €1.3billion worth of tax that should have been paid throughout the year. However, Washington has been yet to crumble to this until recently, as they felt it was unfair notion and a step too close to reigniting transatlantic trade tensions.[6]

How does this affect the legal sector?

During the events of the past year, there has been many ongoing legal battles between both French and US trade representatives. The key factor that has stood out since the initial introduction of this charge has been that the tax does not comply with French constitution and could therefore be ruled unlawful and discriminatory, with the majority of tech giants being American. [7]

Yet this has yet to have an effect on France, and by all accounts it’s been confirmed in the recent weeks that the US have retreated in their threat to apply a tax onto imported French goods. This is mainly down to the inauguration of President Joe Biden who would take a different approach on resolving this ongoing issue.

But for the time being the tax war has concluded and it's all quiet on the French front. [8]

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References:

[1] ComAware, ‘US retreats from Tech Tax Battle.’ (Comaware.net, 10th January 2021) Accessed 14th Janurary 2021, < https://comaware.net/2021/01/10/top-10-stories-of-last-week-04-01-2021/ >

[2] Ibid

[3] Victor Mallet ‘France Demands Digital Tax Payment from US tech Groups’ (The Financial Times, 25th November 2020) Accessed 15th January < https://www.ft.com/content/2cfe3d07-7e69-4f57-b634-8b6002f967cb >

[4] Liz Alderman, ‘France and US move to Temporary Truce in Trade War’ (The New York Times, Jan 21 2020) Accessed 16th January 2021 < https://www.nytimes.com/2020/01/21/business/france-US-digital-tax.html >

[5] Aime Williams ‘France Demands Digital Tax Payment from US tech Groups’ (The Financial Times, 25th November 2020) Accessed 15th January < https://www.ft.com/content/2cfe3d07-7e69-4f57-b634-8b6002f967cb >

[6] Ibid

[7] Isabel Gottleib ‘Threat of Legal Challenge over French Digital Tax’ (Bloomberg Tax, 11th July 2020) Accessed 14th January 2021 < https://news.bloombergtax.com/daily-tax-report-international/threat-of-legal-challenges-hangs-over-french-digital-tax >

[8] Ibid

Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.