USA investigating French plans to tax tech giants

Ann Santiago
July 12, 2019

By instructing Robert Lighthizer, America's chief trade official, to examine retaliatory trade tariffs against France, the US President casually tossed a grenade at Le Maire's best laid plans to tax big technology companies. Companies such as Alphabet Inc's Google, Apple Inc, Facebook Inc and Inc would likely be subject to the tax.

The UK government unveiled plans for a tax on global tech firms hours after the French senate voted to approve a similar levy - despite US President Donald Trump's opposition.

"I invite my American friends to work with us at the OECD for a fair digital tax", Le Maire told French television station LCI in March.

The fact that Apple does not manufacture iPhones in France somewhat diminishes the impact of the proposed new tax.

France's proposal could place a 3% tax on tech companies with annual revenue of more than $842 million.

The measures would hit companies in these sectors with global revenues of more than £500m and revenue from United Kingdom users of more than £25m.

"And this will continue to be the case", said Bruno Le Maire Finance Minister of France in a statement.

President Macron's tax is set to raise 400 million euros ($450m; £360m) just this year.

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".

Now tech giants are able to pay little or no corporate tax in countries where they do not have a large physical presence.

The United States will continue its efforts with other countries at the Organisation for Economic Co-operation and Development (OECD) to reach a multilateral agreement to address the challenges to the worldwide tax system posed by an increasingly digitized global economy, the USTR office said.

The so-called Section 301, under an outdated USA trade law adopted in 1974, allows the US president to unilaterally impose tariffs or other trade restrictions on foreign countries. The inquiry could lead to retaliatory tariffs. The United States and the EU have threatened to impose billions of dollars of tit-for-tat tariffs on planes, tractors and food in a almost 15-year dispute at the World Trade Organization over aircraft subsidies given to US planemaker Boeing Co (BA.N) and its European rival, Airbus SE (AIR.PA).

The lawmakers included a suggestion to use a section of the tax code that would double the rate of US taxes on French citizens and companies in the U.S.

On Wednesday, the investigation received the approval of Republican Senate Finance Committee Chairman Chuck Grassley and Senator Ron Wyden, the senior Democrat on the panel.

"In light of today's announcement, we urge the French Government to reconsider its unilateral tax and focus instead on achieving a multilateral consensus to reform global tax rules for the digital age that is underway at the Organization for Economic Cooperation and Development (OECD)", Colvin said.

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