Initiation of a Section 301 Investigation of France's Digital Services Tax

 
CONTENT
Federal Register, Volume 84 Issue 136 (Tuesday, July 16, 2019)
[Federal Register Volume 84, Number 136 (Tuesday, July 16, 2019)]
[Notices]
[Pages 34042-34044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15081]
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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
[Docket No. USTR-2019-0009]
Initiation of a Section 301 Investigation of France's Digital
Services Tax
AGENCY: Office of the United States Trade Representative.
ACTION: Notice of initiation of investigation, public hearing, and
request for comments.
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SUMMARY: The U.S. Trade Representative (Trade Representative) is
initiating an investigation with respect to the Digital Services Tax
(DST) under consideration by the Government of France. The Section 301
Committee will hold a public hearing and is seeking public comments in
connection with this investigation.
DATES:
    July 10, 2019: The Trade Representative initiated the investigation
with respect to the French DST.
    August 12, 2019 at noon EDT: Deadline for filing requests to appear
at the August 19, 2019 public hearing, and for filing written version
of your oral testimony.
    August 19, 2019 at noon EDT: To be assured of consideration,
written comments must be submitted by this date.
    August 19, 2019: The 301 Committee will convene a public hearing at
9:30 a.m. in Rooms 1 and 2, 1724 F Street NW, Washington, DC 20508.
    August 26, 2019: Due date for filing post-hearing submissions.
ADDRESSES: You should submit written comments through the Federal
eRulemaking Portal: http://www.regulations.gov. Follow the instructions
for submitting comments in section IV and V. The docket number is USTR-
2019-0009. For issues with on-line submissions, please contact the
Office of the United States Trade Representative (USTR) Section 301
line at (202) 395-5725.
FOR FURTHER INFORMATION CONTACT: For procedural questions concerning
the submission of written comments or participating in the public
hearing, please contact the Office of the United States Trade
Representative (USTR) Section 301 line at (202) 395-5725. For all other
questions concerning the investigation, please contact the USTR Section
301 line or Kate Hadley, Assistant General Counsel at (202) 395-4959,
Robert Tanner, Director, Services and Investment, (202) 395-6125, or
Michael Rogers, Trade Policy Analyst, Europe and the Middle East, (202)
395-2684.
SUPPLEMENTARY INFORMATION:
I. The Digital Services Tax
    On March 6, 2019, the Government of France released a proposal for
a 3% levy on revenues that certain companies generate from providing
certain digital services to, or aimed at, French users (the Digital
Services Tax, or the DST). On June 26, a joint committee of the two
houses of the French Parliament agreed to a joint committee DST bill.
On July 4, the French National Assembly passed the DST bill. The French
Senate is expected to take up the bill on July 11.
    Under the joint committee bill, the DST applies to revenues
generated from certain ``digital interface'' services (e.g., e-
marketplaces for goods and services) and certain internet advertising
services. Certain services that would otherwise be covered are
excluded, including digital interfaces for the delivery of ``digital
content.'' The tax applies only to companies with annual revenues from
the covered services of at least [euro]750 million globally and
[euro]25 million in France. The DST applies to gross revenues from
providing the covered services to, or aimed at, French individuals, not
to income. Many of the companies likely to be covered are not domiciled
in France and have no permanent establishment there. Under current
international tax rules, these companies do not pay--or expect to pay--
taxes to France on the revenue they earn by providing services to, or
aimed at, French individuals. The tax applies retroactively beginning
January 1, 2019. Available evidence, including statements by French
officials, suggest that France expects the tax to target certain large,
U.S.-based tech companies.
II. Initiation of Section 301 Investigation
    Section 302(b)(1)(A) of the Trade Act of 1974, as amended (Trade
Act),
[[Page 34043]]
authorizes the United States Trade Representative (Trade
Representative) to initiate an investigation to determine whether an
act, policy, or practice of a foreign country is actionable under
section 301 of the Trade Act. Actionable matters under section 301
include, inter alia, acts, polices, and practices of a foreign country
that are unreasonable or discriminatory and burden or restrict U.S.
commerce. An act, policy, or practice is unreasonable if the act,
policy, or practice, while not necessarily in violation of, or
inconsistent with, the international legal rights of the United States,
is otherwise unfair and inequitable.
    Pursuant to section 302(b)(1)(B), USTR has consulted with the
appropriate advisory committees. USTR also has consulted with the
inter-agency Section 301 Committee. In light of concerns with France's
DST policy, as set out in the joint committee bill, the Trade
Representative initiated a Section 301 investigation on July 10, 2019.
Pursuant to section 303(a) of the Trade Act, the Trade Representative
has requested consultations with the Government of France.
    Pursuant to section 304 of the Trade Act, the USTR must determine
whether the act, policy, or practice under investigation is actionable
under Section 301. If that determination is affirmative, the USTR must
determine what action to take.
    The investigation initially will focus on the following concerns
with the DST, as reflected in the joint committee bill.
    (1) Discrimination: Available evidence, including statements by
French officials, indicates that the DST will amount to de facto
discrimination against U.S. companies. For example, the revenue
thresholds have the effect of subjecting to the DST larger companies--
which, in the covered sectors, tend to be U.S. companies--while
exempting smaller companies, particularly those that operate only in
France.
    (2) Retroactivity: The DST would be a substantively new tax that
applies retroactively to January 1, 2019. This feature calls into
question the fairness of the DST. Further, since the tax is
retroactive, companies covered by the DST may not track the data
necessary to calculate their potential liability back to the beginning
of 2019.
    (3) Unreasonable tax policy: The DST appears to diverge from norms
reflected in the U.S. tax system and the international tax system in
several respects. These apparent departures include:
Extraterritoriality; taxing revenue not income; and a purpose of
penalizing particular technology companies for their commercial
success.
    In addition to these areas of concern with the DST, interested
parties are invited to raise other aspects that may warrant a finding
that the French DST is actionable under Section 301.
III. Request for Public Comments
    Interested persons are invited to submit written comments or oral
testimony on any issue covered by the investigation. In particular,
USTR invites comments with respect to:
     Concerns with the French digital services tax, as set out
in the joint committee bill or as subsequently modified or adopted by
the Government of France, including the specific concerns identified
above;
     Whether the French DST is unreasonable or discriminatory;
     The extent to which the French DST burdens or restricts
U.S. commerce;
     Whether the French DST is inconsistent with France's
obligations under the WTO Agreement or any other international
agreement; and
     The determinations required under section 304 of the Trade
Act, including what action, if any, should be taken.
IV. Hearing Participation
    The Section 301 Committee will convene a public hearing at the
Office of the U.S. Trade Representative, located at 1724 F Street NW,
Washington, DC 20508, Rooms 1 and 2, beginning at 9:30 a.m. on August
19, 2019. You must submit requests to appear at the hearing by August
12, 2019. The request to appear should include a written version of the
testimony you expect to give. Remarks at the hearing may be no longer
than five minutes to allow time for questions from the Section 301
Committee.
    All submissions must be in English and sent electronically via
www.regulations.gov. To submit a request to appear at the hearing via
www.regulations.gov, enter docket number USTR-2019-0009. In the ``type
comment'' field, include the name, address, email address, and
telephone number of the person presenting the testimony. Attach
testimony, and a pre-hearing submission if provided, by using the
``upload file'' field. USTR strongly prefers submissions in Adobe
Acrobat (.pdf). The file name should include the name of the person who
will be presenting the testimony. In addition, please submit a request
to appear by email to [email protected]. In the subject line of the
email, please include the name of the person who will be presenting the
testimony, followed by `Request to Appear'. Please also include the
name, address, email address, and telephone number of the person who
will be presenting testimony in the body of the email message.
V. Procedures for Written Submissions
    All submissions must be in English and sent electronically via
www.regulations.gov. To submit comments via www.regulations.gov, enter
docket number USTR-2019-0009. Find a reference to this notice and click
on the link entitled ``comment now!'' For further information on using
the www.regulations.gov website, please consult the resources provided
on the website by clicking on ``how to use regulations.gov'' on the
bottom of the www.regulations.gov home page. We will not accept hand-
delivered submissions.
    The www.regulations.gov website allows users to submit comments by
filling in a ``type comment'' field or by attaching a document using an
``upload file'' field. USTR prefers that you submit comments in an
attached document. If you attach a document, it is sufficient to type
``see attached'' in the ``type comment'' field. USTR strongly prefers
submissions in Adobe Acrobat (.pdf). If you use an application other
than Adobe Acrobat or Word (.doc), please indicate the name of the
application in the ``type comment'' field.
    File names should reflect the name of the person or entity
submitting the comments. Please do not attach separate cover letters to
electronic submissions; rather, include any information that might
appear in a cover letter in the comments themselves. Similarly, to the
extent possible, please include any exhibits, annexes, or other
attachments in the same file as the comment itself, rather than
submitting them as separate files.
    For any comments submitted electronically containing business
confidential information, the file name of the business confidential
version should begin with the characters ``BC''. Any page containing
business confidential information must be clearly marked ``BUSINESS
CONFIDENTIAL'' on the top of that page and the submission should
clearly indicate, via brackets, highlighting, or other means, the
specific information that is business confidential. If you request
business confidential treatment, you must certify in writing that
disclosure of the information would endanger trade secrets or
profitability, and that the information would not customarily be
released to the public. Filers of submissions containing business
confidential information also must submit a public version of their
[[Page 34044]]
comments. The file name of the public version should begin with the
character ``P''. The ``BC'' and ``P'' should be followed by the name of
the person or entity submitting the comments or rebuttal comments. If
these procedures are not sufficient to protect business confidential
information or otherwise protect business interests, please contact the
USTR Section 301 line at (202) 395-5725 to discuss whether alternative
arrangements are possible.
    USTR will post submissions in the docket for public inspection,
except business confidential information. You can view submissions on
the https://www.regulations.gov website by entering docket number USTR-
2019-0009 in the search field on the home page.
Joseph Barloon,
General Counsel, Office of the U.S. Trade Representative.
[FR Doc. 2019-15081 Filed 7-15-19; 8:45 am]
BILLING CODE 3290-F9-P