France passes law taxing tech giants despite USA anger

Donald Trump ordered the investigation

Donald Trump ordered the investigation Credit AFP

"The United States is very concerned that the digital services tax ... unfairly targets American companies", U.S. Trade Representative Robert Lighthizer said in a statement on July 10.

On Thursday, France's senate approved a tax targeting the French revenue of about 30 tech companies - most of which are based in the U.S.

Under the probe, the USA has up to a year to deduce whether France's moves in the field of digital tax amount to an unfair trade policy.

They had proposed a 3 percent tax on European advertising sales by digital companies, rather than the broad tax on the total revenues of large digital firms originally suggested.

The new French tax applies to companies that generate worldwide revenues on their digital services of at least 750 million euros ($845 million / £673 million), with 25 million euros ($28 million / £22 million) generated within France, explains CNBC.

Addressing the French Senate before the Thursday vote, Finance Minister Bruno Le Maire this was "the first time in history" that Washington has invoked Section 301 against France.

The new measure is expected to bring in some 182 million euros a year which will be invested in greener transport infrastructures, notably rail, she said.

A number of other countries are considering similar levies amid the belief that wealthy USA tech giants aren't paying enough tax worldwide.

He touted France as "a sovereign state" which he stressed "alone decides on its taxation mechanisms and it will continue to do so".

The minister advised that the USA and France can do well by reaching agreements instead of bandying out threats against "fair taxation" of internet giants.

The French government says the tax does not specifically target United States companies and will affect European and Asian firms as well.

France pushed ahead with the tax after European Union countries failed to agree a levy valid across the bloc in the face of opposition from Ireland, Denmark, Sweden and Finland. It's for that reason that the United States government has ordered an inquiry into the new tax, with the potential to implement tariffs on French goods in retaliation. The UK, Spain, Italy, and Austria are considering similar sales taxes, raising the question of how the USA will respond if they take effect.

The so-called Section 301, under an outdated USA trade law adopted in 1974, allows the US president to unilaterally impose tariffs or other trade restrictions on foreign countries.

The probe could lead to the U.S. imposing extra tariffs or other trade restrictions.

Flaying the French tax, Amazon called it "poorly constructed" and "discriminatory", adding that it does "significant harm to American and French consumers alike". Other EU nations have announced their own plans for digital taxes, including Britain, Spain and Italy.

Most tech giants have offices in countries like Ireland or Luxembourg, where low tax regimes prevail.

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