French tech tax inflames tensions with US

Clay Curtis
July 14, 2019

The French government has introduced a tax aimed at large online companies like Amazon.

The French digital tax is the first in Europe, but Great Britain, Spain and Austria are also developing similar policies.

"It's a taxation on revenues (and not on profits), encouraging companies to reduce their level of investments and innovation", he said. The tax will hit about 30 companies, including major Irish employers Apple, Facebook and Google.

Yesterday (11 July), the French government approved a 3pc tax on large tech companies' local revenues, which is their total sales in France.

But the French move drew an angry response from the White House even before the legislation was passed, with Trump ordering an investigation unprecedented in the history of French-US relations. Ireland, Luxembourg and other small European Union members have been active in thwarting efforts to impose an EU-wide digital tax, hastening go-it-alone efforts by France, Britain and others. When in place, the proposed United Kingdom digital services tax will target "large digital businesses" that generate more than £500m in global revenue and more than £25m in United Kingdom revenue, upon which it will impose a 2% levy. France forecasts that the tax could bring in as much as €500m a year.

Earlier this year, the European Commission outlined proposals for a 3pc tax on revenues of large internet companies with global revenues above €750m per year, but this move was met with the same criticism that met France's decision from those who believe that this type of tax breaches worldwide rules on equal treatment for companies around the world.

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The adoption of the law came as Britain unveiled draft legislation for a tax on digital giants, that would amount to 2.0 percent and reflect "the value derived from their United Kingdom users", the British government said.

Tech giants face payments in the tens of millions under the measure.

"France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign", Le Maire said. In the first quarter of this year, for instance, Amazon's share of French e-commerce went down slightly, but the American retail behemoth still controlled no less than half of France's online trade.

But, she added, other countries are already looking at new taxes on big tech companies.

"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies", said U.S. Trade Representative Robert Lighthizer in a statement.

Such a move is supported by Google which believes it would mean Silicon Valley tech giants would pay less tax in the U.S. and more in other jurisdictions, in a departure from the longstanding practice of paying most taxes in a company's home country.

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