France faces Trump on planned tax

France won’t back off from its planned tax on companies like Facebook and Google, even after the US suggested it may use trade tools against the levy.

The French senate passed a bill to impose a three per cent  levy on global tech companies that have at least €750m in worldwide revenue and digital sales of €25m in France.

The US said, earlier this week, that it will examine whether the tax would hurt its tech firms, by using the so-called 301 investigation, the same tool the president, Donald Trump, deployed to impose tariffs on Chinese goods because of the country’s alleged theft of intellectual property.

France said the digital tax is in keeping with international rules, and that it won’t accept the use of trade tools to try to thwart it.

“I deeply believe that, between allies, we can and must resolve our differences in ways other than with threats,” French finance minister, Bruno Le Maire, said in the senate.

“France is a sovereign state that decides its tax measures with sovereignty and will continue to take sovereign tax decisions,” he said.

With the passage of the bill, France will become the first country in the EU to impose such a levy, with other nations, including the UK and Germany, mulling similar taxes.

A broad, EU-wide digital tax failed to garner a consensus this year, with France among the biggest advocates for an EU-wide tax on tech companies’ revenue from digital advertising, and with Ireland and others pushing back.

The law, which goes into effect retroactively from the start of this year, targets 30 companies. While most of them would be American, they include Chinese, German, UK, and even French firms. It will affect companies that profit from providing digital services to French users.

French president, Emmanuel Macron, has two weeks to sign off or seek changes to the law. French presidents rarely seek changes, once they are passed by parliament.

They have done so only three times in the last 40 years.

Mr Le Maire said he spoke to US Treasury secretary, Steven Mnuchin, and noted that it’s the first time in the history of relations between the two countries that Washington has opened a 301 investigation against France.

The passage of the tax bill and the US investigation threaten to further strain trans-Atlantic ties, as the two sides prepare to negotiate a limited trade agreement on industrial goods.

The French have, in the past, asked the US to work with Europe at the OECD for a “fair digital tax”.

– Bloomberg