The Trump Administration is considering import duties of 100 percent to retaliate against tech taxes in the EU.
In November, we discussed new tax rules being readied by the EUs Organization for Economic Cooperation and Development (OECD). To recap, the OECD is developing rules to address the problem of American tech giants who make a lot of money from European consumers but allegedly do not pay appropriate taxes to the countries where they operate. Think Apple, an American company headquartered in Ireland, but raking in profits all over the world. By using Ireland as its offshore tax haven, Apple significantly reduces its tax liability and boosts profits.
By sequestering tax liability in a low-tax home base, companies like Amazon, Apple, and Google (among others) avoid paying into the tax base of countries all over the EU, depriving governments of tax income they might rightly expect for profits earned from their citizens. France has claimed this practice amounts to a tax crime.
France has led the charge in rectifying the gap between the enormous profits earned by multinational companies and the minimal amount they pay for the privilege.
Trouble brewing across the pond
In the US, the proposed rules by the OECD, and actions already taken by France against tech giants does not sit well with the Trump Administration.
According to the New York Times, investigation into the proposed French tax yielded a finding that the levy “discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy and is unusually burdensome for affected U.S. companies.”
In other words, it is not fair that US tech companies should be burdened with taxes outside their preferred tax haven of choice. Of the French tax, President Trump noted, “They’re starting to tax other people’s products. So therefore we go and tax them.”
The Trump Administration then suggested import duties on champagne, cheeses, and other French luxury goods of up to 100 percent in retaliation.
The potential tariff could overturn the applecart now precariously perched due to ongoing negotiations between the OECD and its member countries, along with the tech companies, to forge an agreement on the issue. It is not in the interest of multinational companies to face tax regulations in countries across the EU. Several other EU countries are now readying their own digital tax proposals.
The EU and France have signaled they will also retaliate if the US goes ahead with its threatened tariffs. Regardless of the tiresome game of escalation, a tax on revenue earned by American tech giants from European consumers is a matter of when, not if.
Contact an experienced tax attorney for strategic representation on issues of tax fraud
If you are involved in an offshore tax, employment tax issue, or criminal tax fraud issue, contact us at Robert J. Fedor, Esq., LLC for a confidential consultation. With offices in Chicago, Illinois, and Cleveland, Ohio we deliver skilled legal representation to resolve individual and corporate tax troubles. Contact us or call 800.579.0997 today.
