France, US trade barbs over digital services tax
By Frank Prenesti
Date: Thursday 11 Jul 2019
(Sharecast News) - A trade war looked set to break out on a new front as France clashed with the US over the introduction of new tax on tech firms such as Amazon, Google and Facebook.
The 3% digital services tax will be levied on sales generated in France, with the government arguing that companies in the sector headquartered outside the country pay little or no tax.
US President Donald Trump immediately order and investigation into the French tax which could lead to retaliatory tariffs.
The new tax was on Thursday approved by the French senate after it was passed by the lower house, or National Assembly, last week. Any digital company with revenue of more than €750m (£670m) - of which at least €25m is generated in France - would be subject to the levy.
It was expected to raise €400m this year and would be retroactively applied from early 2019.
Speaking in response to the US probe, French Finance Minister Bruno Le Maire said France was "sovereign and decided its own tax rules".
"I want to tell our American friends that this should be an incentive for them to accelerate even more our work to find an agreement on the international taxation of digital services," he said.
The idea of a digital tax has been an EU objective for years, but progress was thwarted by countries such as Ireland who have benefited from large tech firms setting up their European headquarters to take advantage of low corporate tax rates.
Austria, Britain, Spain and Italy have also broken away to plan their own taxes.
UK Finance Minister Philip Hammond last year pledged to introduce a digital sales tax in his budget, but as he expects to be fired by the next UK prime minister later this month, there were doubts his plans would see the light of day.
On Wednesday US trade representative Robert Lighthizer said an investigation would "determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce".
Meanwhile, European Union member states were warned by a German official to expect more US tariffs in the months ahead.
Peter Beyer, Germany's transatlantic coordinator and member of parliament, said Trump appeared poised to impose tariffs over disputes about aircraft subsidies, the Nordstream 2 gas pipeline and European car imports.
Trump in May said some imported vehicles and parts posed a national security threat, but postponed a decision on imposing tariffs on European and Japanese imports for up to six months to allow time for trade talks.
"These are difficult discussions in a difficult international environment," Germany Economy Minister Peter Altmaier said after meeting with US Treasury Secretary Steven Mnuchin in Washington. Altmaier was due to meet with Lighthizer and Commerce Secretary Wilbur Ross on Thursday.
Beyer said the auto tariffs could be imposed in mid-November as Washington retaliated against the EU's refusal to include agriculture in broader trade talks.
On aircraft subsidies, the World Trade Organisation has found that both Boeing and Europe's Airbus have received billions of dollars of harmful or illegal government subsidies to gain advantage in the global market.
The US and EU have each threatened to impose billions of dollars of tit-for-tat tariffs. Washington has applied for $11.2bn under WTO rules.
European firms could face action over US objections on security grounds to Russia's Nord Stream 2 natural gas pipeline project, Beyer added.
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