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French minister warns against US tech tax retaliation

Image credit: REUTERS/Dado Ruvic

The French economy minister, Bruno Le Maire, has warned the US government against any retaliation following the introduction of a digital services tax targeting large American tech companies.

In July 2019, French parliamentarians approved plans for a digital services tax intended to prevent tax dodging by large tech companies, which pay very little tax in countries like France despite healthy user bases and sales in these countries. The digital services tax of three per cent will be applied to companies providing intermediation services of targeted advertising with a global revenue of more than €750m, including more than €25m in French revenue.

The tax is considered an interim measure which is highly likely to be withdrawn if an international deal can be agreed with other OECD countries.

It will affect approximately 30 multinationals, including Google, Amazon, Facebook, Apple, Airbnb and Uber. Most of the companies affected are internet-based US companies, many of which profit from collecting user data.

In response, the Trump administration has threatened to impose heavy duties of up to 100 per cent on French products such as champagne and luxury handbags. These taxes could amount to $2.4bn per year. The French economy minister has warned against these sanctions, saying that this retaliation would damage the transatlantic relationship.

“If the Americans decide to go ahead and impose sanctions against the digital tax […] in this case we would retaliate,” said Le Maire, speaking to France Inter radio. “If there were to be sanctions, and it is a possibility that we will take sanctions, we would immediately contact the WTO [World Trade Organisation].”

Le Maire has written to US trade negotiator Robert Lightizer in a letter which states that: “If the US were to decide to impose trade sanctions against the EU over the French Digital Services Tax, it would deeply and durably affect the transatlantic relationship at a time when we need to stand united.”

He stated that France was communicating with the European Commission and other EU member states on the issue which stand with France and were considering their options to “defend [their] trade rights in a proportionate and determined manner”.

Le Maire is due to speak on the phone to US treasury secretary Steven Munchin about the issue.

In December 2019, UK Prime Minister Boris Johnson announced that the government would continue to pursue plans to impose a similar tax targeting large tech companies in the new Parliament. Under these proposals, tech companies generating at least £500m a year in global revenue would be subject to a three per cent levy on revenue generated from UK users, beginning in the 2020-21 tax year.

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