France's Senate gave final approval to a tax on big technology companies yesterday, potentially opening up a new front in a trade row between Washington and the European Union.
US President Donald Trump on Wednesday ordered an investigation into the tax, which could lead to the United States imposing new tariffs or other trade restrictions. “Between allies, we can and should solve our disputes not by threats but through other ways,” Finance Minister Bruno Le Maire told senators before the final vote.
The 3 percent levy will apply to revenue from digital services earned in France by firms with more than 25 million euros (US$28 million) in French revenue and 750 million euros worldwide. It is due to kick in retroactively from the start of 2019.
France pushed ahead with the tax after EU countries failed to agree a levy valid across the bloc in the face of opposition from Ireland, Denmark, Sweden and Finland. “France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign,” Le Maire said.
Other EU countries including Austria, Britain, Spain and Italy have also announced plans for their own digital taxes. They say a levy is needed because big, multinational Internet companies such as Facebook and Amazon are currently able to book profits in low-tax countries like Ireland, no matter where the revenue originates.
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. 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.
The ASIC French lobby representing firms like Facebook, Google, Amazon, Twitter and Airbnb warned of a wider impact. “By attempting to unilaterally overtax American players, Bruno Le Maire has triggered a trade war that penalizes French technology today and will penalize tomorrow many sectors that make the French economy successful, including wine, automobiles and luxury,” ACIS President Giuseppe de Martino said.
The digital tax spat is separate from the transatlantic trade row, but could be used by Trump to try to obtain EU concessions on the trade front.