France passes tech tax despite USA investigation

Jeannie Matthews
July 12, 2019

Just ahead of the vote Thursday, French economy minister Bruno Le Maire said allies needed to settle differences "without using threats".

It will target companies such as Google and Facebook with a 3% levy on revenue made inside France. It is due to kick in retroactively from the start of 2019. Currently, the companies pay almost no tax in countries where they have large sales like France.

He touted France as "a sovereign state" which he stressed "alone decides on its taxation mechanisms and it will continue to do so". They avoid paying tax and even if they pay it will be in those European Union countries where they have set up offices.

In response, USA officials called for a Section 301 investigation into unfair trade practices, fearing the proposed tax would unfairly punish large American firms like Google and Amazon. Political pressure to respond has been growing as local retailers in high streets and online have been disadvantaged; French President Emmanuel Macron has said that taxing big tech more heavily is an issue of social justice.

In a joint statement, they said: "The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost U.S. jobs and harm American workers".

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The ASIC French lobby representing firms like Facebook, Google, Amazon, Twitter and Airbnb warned of a wider impact.

Same investigation was previously conducted into China's practices and resulted in a full blown trade war, which is weighing on the global growth. The move comes in spite of the Trump administration claiming the tax "unfairly targets American companies", and warnings that the USA could respond with its own tariffs or trade restrictions. "We applaud the Trump Administration for taking decisive action against France and for signalling to all of America's trading partners that the USA government will not acquiesce to tax and trade policies that discriminate against American businesses", said a statement from Amazon.

The European Commission says it will coordinate closely with French authorities on the next steps, following a threat by the United States to slap new tariffs on the country. "It is the first time in the history of the relationship between the United States and France that the USA administration has made a decision to open [a Section 301 investigation]". Other EU nations have announced their own plans for digital taxes, including Britain, Spain and Italy.

"We are merely re-establishing fiscal justice". Le Maire added that the USA and France could find agreements rather than use threats to decide upon fair taxation levels.

"We want to impose on these new business models the same rules that apply to all other economic activities". "For us, (the tax) is totally compliant with worldwide agreements". This is expected by the end of 2020. The levy could affect USA companies including Airbnb and Uber as well as those from China and Europe.

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