US to strike back against France’s digital tax on tech firms

After French president approves digital tax targeting US companies, Trump threatens ‘substantial reciprocal’ action.

Logos of US big tech companies/BLOOMBERG
US technology companies such as Google, Apple, Facebook and Amazon are now subject to a digital tax on their respective revenues as a result of legislation signed into law this week by French president Emmanuel Macron [File: Bloomberg]

United States President Donald Trump said on Friday that the US would hit France shortly with a “substantial reciprocal action” after Paris announced a tax aimed at US technology companies.

“If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly,” Trump tweeted, referring to French President Emmanuel Macron. “I’ve always said American wine is better than French wine!”

Last week, Trump spoke with Macron and expressed concerns about the country’s proposed digital services tax, the White House said.

White House spokesman Judd Deere said the US “is extremely disappointed by France’s decision to adopt a digital services tax at the expense of US companies and workers. France’s unilateral measure appears to target innovative US technology firms that provide services in distinct sectors of the economy.”

He added, “the administration is looking closely at all other policy tools”.

The office of the US Trade Representative (USTR) last month said it would hold a hearing on August 19 in its probe of France’s new planned tax on big technology companies after Trump ordered an investigation into the tax, which could lead to the US imposing new tariffs or other trade restrictions.

USTR said the levy was “unreasonable tax policy”. The plan departs from tax norms because of “extraterritoriality; taxing revenue not income; and a purpose of penalizing particular technology companies for their commercial success,” it said.

USTR added that statements by French officials suggest the tax will “amount to de facto discrimination against US companies … while exempting smaller companies, particularly those that operate only in France”.

The tax is due to apply retroactively from the start of 2019. USTR said that calls into question the fairness of the tax.

Two weeks ago, the French Senate approved the three percent levy that will apply to revenue from digital services earned in France by firms with more than 25 million euros ($28m) in French revenue and 750 million euros ($836m) worldwide.

Other EU countries including Austria, Britain, Spain and Italy have also announced plans for their digital taxes.

They say a levy is needed because big multinational internet companies such as Facebook and Amazon are currently able to book profits in low-tax countries such as Ireland, no matter where the revenue originates.

Political pressure to respond has been growing as local retailers online and in brick-and-mortar stores have been put at a disadvantage.

Source: Reuters