It's handbags at dawn: America to hit France with 25% tariffs on luxuries over digital tax on US tech titans
- Reference: 1594706584
- News link: https://www.theregister.co.uk/2020/07/14/america_france_tariffs/
- Source link:
In a [2]notice [PDF] put out by the US Trade Representative this month, the Trump administration said it will add the taxes to 21 categories of three types of product: cosmetics, soap, and handbags. Which may seem ridiculous but their value is collectively over $1bn in trade, apparently.
Notably, however, the US government has stopped short of following through with President Trump’s [3]threat last year to add the French wine industry to the tariff list: something that would have infuriated Americans, and raised the risk of a larger trade war with the French government.
The US government has also backed away from imposing the tariffs this year, and put in place an 180-day “suspension period,” so they kick in instead on January 6, 2021. The intent is to put pressure on the European Union to come up with a lighter pan-European digital tax before the end of the year; France’s digital tax also won’t kick in until 2021.
Unlike many of the Trump administration’s previous tariff decisions that were more political weapons than trade signals, these French tariffs have run through the [4]formal policy process . Hearings were held and a report produced that concluded the French Digital Services Tax (DST) was “unreasonable or discriminatory and burdens or restricts US commerce.”
Europe as a whole is furious that tech giants like Apple, Amazon, Google, and Facebook are using elaborate tax structures to avoid paying the full expected whack, and have vowed to pass legislation to fix the issue. However, the DST goes out of its way to ensure that French and German businesses that could easily be caught in the crossfire are exempted.
GAFA
The [5]report [PDF] into the tax by the US government pointed out that French ministers had repeatedly referred to American tech companies when discussing why the tax was needed, even referring to it as the “GAFA tax,” referring to Google, Apple, Facebook, and Amazon. “Statements of French officials show that the DST is intended to target certain US digital companies and not French companies,” the report noted.
But more significantly, the new tax is designed to work around French companies, the US claims. Revenue thresholds mean that the tax almost exclusively applies only to the largest US companies. The tax also covers specific categories – internet advertising and “digital interfaces” – and doesn’t touch related industries where French companies are more successful, the report finds.
Stiff upper lip time, Brits: After bullying France to drop its digital tax on Silicon Valley, Trump's coming for you next [6]READ MORE
In the “digital interface” market, for example, the report notes that “twelve of the twenty-one company groups expected to be covered... are US-based. No other country has more than three companies expected to be covered, and no French company groups are expected to be covered.” That is despite the fact that within France, French companies take up a significant proportion of the e-commerce market.
The clearest carve-outs are, however, for online retailers that sell their own content: these are exempt from the tax, as is income from data collected by sensors – something specifically introduced to protect the German car industry, according to Uncle Sam's report.
Of course, the US tech giants’ efforts to avoid paying taxes in Europe have been particularly egregious so it’s to be expected that they would be targeted. But the US trade reps also have a point when they argue that the tax unfairly targets US companies; a position somewhat undermined by the even-more targeted tariffs that it says it will apply next year in retaliation.
In the meantime, everyone’s hopes are currently pinned on the Organisation for Economic Co-operation and Development and its efforts to forge agreement on a more global digital tax and avoid the imposition of harsher, country-specific digital taxes. This notice from the US trade representatives targeting French handbags and beauty products effectively put a deadline on those talks. ®
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[1] https://www.theregister.com/2019/07/12/france_us_trade_war/
[2] https://ustr.gov/sites/default/files/enforcement/301Investigations/France_Digital_Services_Tax_Notice_July_2020.pdf
[3] https://twitter.com/realDonaldTrump/status/1154791664625606657
[4] https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-frances-digital-services-tax
[5] https://ustr.gov/sites/default/files/Report_On_France%27s_Digital_Services_Tax.pdf
[6] https://www.theregister.com/2020/01/23/french_digital_tax/
[7] https://whitepapers.theregister.com/
Re: Pay tax where users reside
the prime reason I see very well off people and companies dodge tax like a devil dodges holy water is because it just keeps going up.
Or maybe very well off people and companies dodge tax like a devil dodges holy water is because they can , and not matter how much they are asked to pay, they'll do their darndest to avoid paying any at all.
And you can add Coprolations to that too.
How much of the French population is using US digital services vs. the population of the US buying designer french handbags and cheeses anyway....
Re: Coprolations
Well played.
Coprolations
What? copro- as in shit, crap, turd? -lation as in producing? So where does taking a dump enter into this story?
I guess the good news is that this might encourage more US dairies to try to make real cheese.
Re: more US dairies to try to make real cheese
WOT? you mean to say that there are some that don't make USDA approved Rubber Substitute? (Aka what is sold as cheese)
This must be as rare as finding 'oak smoked back bacon' in the shops over there in Trump land.
One of these [see icon][virtual] to those who tell us where proper cheese is made and sold in the USA.
Re: more US dairies to try to make real cheese
About 20 years ago I found that there were a number of very decent creameries around Stowe in Vermont, even managing to source some cheddar that was firm, didn't leak oil when squeezed and tasted like a good mature Cheddar.
Discovering that Cheddar was a watershed moment in my life - suddenly the US became a viable place to live. :)
Re: more US dairies to try to make real cheese
There were also some microbreweries in that corner of the US that were producing quite decent beer...
Re: Pay tax where users reside
"the prime reason I see very well off people and companies dodge tax like a devil dodges holy water is because it just keeps going up"
Not the case in the UK. Corporation tax has come down from about 28% to 20% over the past 10 years or so. The theory behind the reduction is that companies will be left more of their profit for investment in people, training, automation, growth, etc. In practice what's happened is that many companies have used the money to buy back their own shares which ramps the price and triggers director bonuses and/or they've distributed it to shareholders. Inward investment in the UK is the lowest it's been for years and the gap between director pay and workers is the biggest it's been for years and continues to grow.
They're tariffs
France will most certainly not be paying the tariffs. French companies will not be paying them either as they will merely factor them into the cost of things. Tariffs work only as a tax on Americans and our idiot in chief has not figured that out yet.
Re: They're tariffs
I think you missed the point. The point is that as these products will now appear more expensive to the average US consumer due to the tariffs, then they will stop purchasing them. This in turn will hit the overall sales figure of the French companies in a punitive manner.
Trump is a child. I hope the vast silent majority of US people have the sense to vote more sensibly next time.
Re: They're tariffs
Well, it's high-priced handbags and stuff - those who buy them might still be willing to buy them. The main reason for buying them seems to be that they are 1) expensive and 2) some "celebrity" (loosely using that term...) was seen having it. That's not going to change.
Re: They're tariffs
Veblen goods. A higher price might just sell more products.
My prayers are with you on that point
Re: They're tariffs
If you tax luxury goods you will make only the lower end consumers stop purchasing them, those already barely able to buy them already. Which are a minority.
Rich enough people will keep on buying bling goods because they show their status. If they become even more exclusive, the better.
The rest will buy more Chinese-made bags, maybe even "French" fake ones. Xi Jinping says "thank you, Donald".
The French government puts France and the French people first and sod everybody else. That's a good thing. That's its job.
Trump does the same for America. I find it hard to see where all the hate in the media comes from. Sure he says some crazy things, but America is prospering relative to other countries, and he hasn't started any illegal wars or carried out any renditions - which makes him a better president than either of Bushes in my book.
I only wish the British government did the same kind of job.
I do believe that a similar tax is on the way in the UK. Here's hoping that they don't blink at the last minute.
When everybody taxes everbody else
It looks like we are going back to the good old days. That is the days of the 1930 and the Smoot–Hawley Tariff. This is an act that was passed in 1930 by a Republican congress and signed by Herbert Hoover and is considered by many one of the things that exacerbated the recession started in 1929 into The Great Depression. One of the reason that it is believed to have done that is because everybody just retaliated and it started a destruction of international trade.
While corporations and others need to pay there Fair Share of Taxes so that governments can supply the services that their people need such as Education, National Security, Health Care and others we need to do this is a rational manner not just throwing tariffs at each other willy-nilly. Or with the current economic fallout from the pandemic we could go into another Great Recession or Depression.
I am sure we could get Boris to start sniffing tonic water and wearing his underwear on his head. The Sarah Cooper impressions might not be so great though.
Bpris underwear
He was recently, blue underpants.
"carried out any renditions"
No. He murdered that Iranian guy though, of course.
If the French law really is carefully targeted to hit only American tech companies....
Then I have to say that I am glad that the U.S. government is targeting French exporters in return. If this was a general acknowledgment that digital services in general are hard to tax correctly and are prone to tax avoidance, then I could have supported it. However, if this is effectively "American digital services bad, European digital services good", then the French deserve what they get in return.
Re: If the French law really is carefully targeted to hit only American tech companies....
It isn't deliberately targeted though. It's just a fact that most of the major digital services that the world uses are American based. There is no European alternative to Facebook, Google etc.
Local sellers can't avoid much taxes
It's no surprise that this tax hits US companies - they are in the best position to avoid the taxes. If your are a French seller selling from France to France you're already paying taxes in France and that's all. If you are a US company you can employ all the tax dodging techniques by selecting one of the EU Tax haven - that's a sore point EU must tackle soon - and then shuffling money around to make them disappear. Actually that's also unfair competition. Sure, there are ways to avoid some taxes in EU too i.e. moving the financial HQ to Netherlands (or UK before Brexit), but not at the scale used by companies which are outside EU, and are thereby enabled to employ dirtier tricks.
Anyway Melania Trump's bags will become more expensive, and Donald will pay more for them...
Re: Local sellers can't avoid much taxes
Melania Trump's bags will become more expensive exclusive, and Donald will pay more for more of them
He should really have asked her how this works.
Re: Local sellers can't avoid much taxes
Trying to work out if Stepford wife or Stockhold syndrome.
Re: Local sellers can't avoid much taxes
Well, she redid the prenup, so probably Stockhold. And hopefully she was smart enough to pick those that don't have his name on them...
Taxes
Setting up artificial barriers to trade rarely works.
After WW2, the US was worried that well made and cheap consumer goods from Japan would cause problems for domestic producers (this was in a time when exchange rates were officially set by govenments - not a mechanism that can be used in these days). So the US overvalued the Yen-$ exchange rate to make Japanese products more expensive in the US. All that happened was Americans still bought the Japanese goods, but now Japan ended up with a lot more $ in their bank accounts than they would have had.
Tariffs are of course different, a direct tax rise on American consumers, so the extra $'s ends up in US Gov. hands, but these seemingly aimed at luxury goods could well end up adding to the cachet of these imports, maybe even increasing sales.
Have no doubt that if the maximum tax rate was only 1% anywhere in the world, most of these Corporations would still be trying to avoid paying.
Pay tax where users reside
Where users reside is where the infrastructure is used, where they have been educated and because useful fodder for the surveillance industry (aka Google Facebook, LinkedIn and all the other US outfits that say "it wasn't me" as soon as you start talking about privacy), so pay tax there.
The problem is that tax and being taxed has always been a dodgy subject as those who have much would like to keep more than Burt cleaning the streets. I'm no economist (which will probably be clear in the next bit), but I'm wondering what would happen if tax percentages stop increasing from a certain level - the prime reason I see very well off people and companies dodge tax like a devil dodges holy water is because it just keeps going up.
Getting 25% of something large versus the barely 1% that's left after all the dodges strikes me as more productive, and less work supervising.
Yeah, yeah, it's too simple, plus it would kick a lot of accountants out of a job. But I still think it's all made too complicated.