Amazon third-party vendors making sales in France will face higher fees starting in October.
The tech giant is already looking for ways to pass on the burden of the European country’s digital services tax (DST), a levy that’s sparked outrage through the U.S. tech community and prompted a hearing at the United States Trade Representative’s Office that concluded Monday afternoon.
Applicable to tech companies that generate revenues of about $832 million globally from “certain services,” and about $28 million from France, the DST proposes a 3 percent tax that disproportionately affects American household names including Facebook, Google, Airbnb, Microsoft and Twitter, in addition to Amazon. The French government announced its intention to apply the tax on March 6.
In written testimony submitted prior to Monday’s hearing, Amazon director of international tax planning and policy Peter Hiltz pointed out the precarious economic impact of the DST on the e-commerce firm’s operations and potential in France.
“The DST represents an incremental and significant cost to Amazon’s consumer business,” Hiltz said, “which operates in the fiercely competitive and very low-margin global retail market. For context, Amazon’s consumer business outside of North America operates at a loss. But even loss-making companies must still pay the French DST.”
Hiltz hinted that the outcome could rewrite Amazon’s roadmap in France, noting that the 3 percent tax “will result in a substantial expense that Amazon cannot absorb if we are to continue making the significant investments in the tools and infrastructure that help fuel our selling partners’ success.”
Amazon’s already notified small and mid-sized businesses selling on its amazon.fr marketplace—to which the DST applies—that their fees will climb by 3 percent for any sales made starting on Oct. 1.
And though digital retail is often seen as getting more breaks than brick-and-mortar, Hiltz accused France’s DST as unfairly targeting the online channel. “The DST also discriminates against online stores because it does not apply to physical retail even though customers freely move between both business models,” he wrote.
The USTR launched its investigation of France’s DST on July 10 and will use testimony from Monday’s hearing to further its probe into the tax. The DST, in enacted, would retroactively apply to any sales made from Jan. 1, 2019, and onward, a feature that the USTR said “calls into question the fairness” of the proposed levy.