France adopts pioneering tax on tech giants after United States threat

Daniel Fowler
July 11, 2019

Lighthizer's agency will investigate the tax under Section 301 of the Trade Act of 1974 - the same provision the Trump administration used past year to probe China's technology policies, leading to tariffs on $250 billion worth of Chinese imports.

"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies", Lighthizer said in a statement announcing the action on Wednesday.

Washington has criticized the move, with US Trade Representative Robert Lighthizer expressing concern that Paris was "unfairly" singling out American companies. The section 301 investigation, which is being run by the U.S. trade representative's office, has said it will hold hearings to allow for public comment on the French tax issue for several weeks before issuing a final report.

But the French move drew an angry response from Trump even before the legislation was passed, with the president ordering an investigation that the French economy minister said was unprecedented in the history of French-US relations.

This type of investigation is the primary tool the Trump administration has used in the trade war with China to justify tariffs against what the United States says are unfair trade practices.

The document was nodded on Thursday by a simple show of hands in France's Senate upper house after being passed by the National Assembly lower chamber.

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However, Irish Finance Minister Paschal Donohoe said in May that national taxes targeting mostly US -based digital firms were "highly likely to exacerbate global trade tensions and damage cross-border trade and investment", and would make it harder to reach agreement on a global reform.

It will only be applied on outgoing flights and not those flying into the country, Borne added.

A spokesman for the French Finance Ministry declined to comment earlier Wednesday, after Bloomberg first reported Trump's decision to open the investigation. "They can go after products where they have leverage".

The administration also got some bipartisan support from the top members of the Senate Finance Committee. The lawmakers urged the look at "all available tools under USA law to address such targeted and discriminatory taxation".

This combination of pictures created on July 10, 2019 shows a Facebook logo on July 4, 2019 in Nantes, an Apple logo in San Francisco on September 7, 2016, a Google logo in China's Chongqing on August 23, 2018, and an Amazon logo in NY on September 28, 2011.

"For us, [the tax] is totally compliant with worldwide agreements". The talks for a deal have progressed slowly because the USA and European Union are at odds over whether to include agriculture in any final agreement. Trump's threat to impose a tariff of as much as 25% on European auto exports has cast a cloud over the negotiations as well.

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