UPDATED 11:26 AM PT – Thursday, July 11, 2019
Despite a warning by the Trump administration, France has decided to move ahead on a new technology tax initiative. 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.
The so-called “digital tax” would levy a three-percent rate on French-generated revenue from these companies, including tech giants like Google, Amazon and Facebook. It’s expected to bring in more than $560 million for the nation.
While addressing the senate, France’s finance minister said data is taxed 14 points lower than other economic activity and all they are doing is “restoring economic fairness.”
“We want to have a tax regime for the 21st Century which is both fair and efficient, and we want to impose the same fiscal rules as those which apply to all other economic activity — it’s fundamentally an issue of fairness and efficiency,” stated Minster Bruno Le Maire.
On Wednesday, U.S. trade representative Robert Lighthizer said the U.S. will investigate if this tax unfairly targets U.S. companies. The investigation will come under the same provision used last year to examine China’s tech policies, Section 301, which led to tariffs on $250 billion worth of Chinese imports. Lighthizer has up to a year to investigate, and the result could end with similar tariffs against France.
In a recent statement, Amazon called the tax “poorly constructed and discriminatory.” The company claimed it will hurt both French and American consumers. Amazon then praised the Trump administration for taking action and for signaling to the rest of the world that the U.S. government will not accept policies that discriminate against American businesses.
The French finance minister pointed out France is a sovereign nation that can make its own decisions regarding taxes, and said threatening tariffs is not the way to go.
“I think that opening a procedure under Section 301 is not, I would say, a friendly signal, and we all know that such a procedure can lead to sanctions against France,” said Le Maire. “Once again, I think that threats, sanctions, are not the good way of sorting out difficulties that we might have between the U.S. and France.”
France moved forward with its own tax after EU nations failed to agree on a union-wide tax, following opposition within its own ranks. Other EU nations have announced their own plans for digital taxes, including Britain, Spain and Italy. They say a tax is needed for multinational internet companies who are able to profit in low-tax countries despite having no physical presence.