Chuck Grassley

United States Senator from Iowa

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Grassley, Wyden Press Mnuchin Over French Government’s Proposed Digital Services Tax

Jun 24, 2019

WASHINGTON – Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) sent a letter to Treasury Secretary Steven T. Mnuchin urging him to consider using all tools available under U.S. law, including the application of section 891 of the tax code, to convince the French government to rethink its decision to implement a digital services tax that would unfairly target some U.S.-based companies.

“We write to encourage you to intensify your efforts to convince the French government that it would be unwise and short-sighted to implement a digital services tax (DST) while France, the United States, and other countries are expeditiously working to reach a consensus at the Organisation for Economic Co-operation and Development (OECD) on the tax challenges arising from the digitalization of the economy,” the senators wrote.

“It is our understanding that notwithstanding the progress being made at the OECD, the French General Assembly and Senate have both passed versions of a DST that could hinder such progress and create a new transatlantic trade barrier. The DST would unfairly target certain U.S.-based multinational companies, apply retroactively to the beginning of this year, and potentially lead to significant double taxation.  Time is, therefore, of the essence.”

Text of the letter is available here and below.

Dear Secretary Mnuchin:

We write to encourage you to intensify your efforts to convince the French government that it would be unwise and short-sighted to implement a digital services tax (DST) while France, the United States, and other countries are expeditiously working to reach a consensus at the Organisation for Economic Co-operation and Development (OECD) on the tax challenges arising from the digitalization of the economy.

It is our understanding that notwithstanding the progress being made at the OECD, the French General Assembly and Senate have both passed versions of a DST that could hinder such progress and create a new transatlantic trade barrier.  A gathering of members of the French General Assembly and Senate is expected as soon as this week at which time an agreement could be reached to resolve the differences in each chamber’s DST provision.  The DST would unfairly target certain U.S.-based multinational companies, apply retroactively to the beginning of this year, and potentially lead to significant double taxation.  Time is, therefore, of the essence.

In recognition of the gravity of this situation, we ask that you consider all available tools under U.S. law to address such targeted, discriminatory taxation.  As you know, the Internal Revenue Code provides tools to address such actions.  Under section 891, a double rate of U.S. tax could be imposed on citizens and corporations of foreign countries engaging in discriminatory taxation of Americans.

We continue to support your active participation in the current OECD negotiations.  We encourage you to take all the steps necessary to convince the French government to abandon its unilateral DST provision, and instead direct its efforts towards reaching a consensus at the OECD.

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