Opposition builds to French digital tax
What’s happening this week: Representatives from tech companies and industry trade groups slammed France’s new digital services tax yesterday during a hearing held by the Office of the United States Trade Representative, saying that the legislation unfairly targets U.S. tech companies. The hearing came after the French Senate last month approved a 3 percent tariff on tech companies with more than 25 million euros (approximately $27.7 million) in French revenue, or have a global revenue of more than 750 million euros (approximately $832 million) per year.
Last month, the USTR launched an investigation in the digital services tax under Section 301 of the Trade Act of 1974, which empowers the administration to retaliate against trade partners. President Donald Trump previously said that the U.S. planned to undertake “a substantial reciprocal action” if France passed the digital tax, even threatening earlier this month to levy a 100 percent tariffs on French wines.
Why it matters to startups: While the effort is directed at larger tech companies, there are already signs that startups and other smaller businesses will be negatively impacted by the tax.
Online retailers like Amazon are already passing the burden of the tax on to small- and mid-sized French businesses that use the platform, which undermines the French government’s argument that the tax will level the playing field between larger companies and smaller startups.
U.S. tech companies and advocates are also concerned that the digital tax will disproportionately target U.S. companies, potentially limiting growth in a global marketplace that is becoming more difficult for smaller companies to enter. Stephanie Holland, vice president of federal and global policy at tech industry group CompTIA, said during the hearing that “Our members are highly concerned with the discriminatory nature of the French government’s DST specifically against successful American companies.”
France’s digital tax is the latest in a long line of recent European Union-based laws and regulations that have disproportionately targeted U.S. tech companies. By over-regulating the EU marketplace, regulators have made it increasingly difficult for smaller U.S. startups to expand overseas. France’s digital services tax makes it even more difficult for growing U.S.-based startups to expand their operations across the globe—a necessity in today’s interconnected world. Arbitrary fines for success—like those in the digital services tax—will chill growth, and will likely be passed on to startups that the tax is not intended to penalize.
On the Horizon.
2019 Congressional Startup Day events are underway! Congressional Startup Day, a nationwide celebration of startup ecosystems across the country, is officially tomorrow, August 21st. But startups and lawmakers have already joined in on the Congressional Startup Day festivities, with meetings taking place this last week and over the next two weeks. During Congressional Startup Day, Engine and our partners help lawmakers meet with startups in their districts and states to learn more about how government can work with startups to support innovation and entrepreneurship. You can track Congressional Startup Day events on Twitter by searching the hashtag #StartupDay2019.