PARIS (AP) – France is pushing ahead with a landmark tax on tech giants like Google and Facebook – despite U.S. President Donald Trump’s threats of retaliatory tariffs on French wine.
After Trump slammed the “foolishness” of the tax in a tweet Friday and promised reciprocal action, French Finance Minister Bruno Le Maire said “France will implement” it anyway.
According to Le Maire’s office, he added, “the universal taxation of digital activity is a challenge that concerns us all.” He said the tax is meant as a temporary measure pending negotiations on an international tax deal.
The 3 per cent tax, which went into force this week, mainly concerns companies that use consumer data to sell online advertising.
It’s designed to stop multinationals from avoiding taxes by setting up European headquarters in low-tax EU countries. Currently, companies such as Google, Amazon, Facebook, Apple, Airbnb, and Uber pay very little tax on their significant business in countries like France.
The Trump administration says the tax is discriminatory against U.S. business.
France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!
— Donald J. Trump (@realDonaldTrump) July 26, 2019
The tax targets any digital company with yearly global sales worth more than 750 million euros ($835 million) and French revenue exceeding 25 million euros ($27 million). It should affect about 30 companies, based in the U.S, China, and Europe — including France.
The revenue threshold is supposed to allow more room for startups. France argues that tech giants are abusing their market dominance, notably through tax avoidance, and preventing others from a fair chance of competing.
The tax only concerns revenues earned in France — not sales in the U.S. or elsewhere.
U.S. Trade Representative Robert Lighthizer began an investigation earlier this month to determine whether the tax is discriminatory or unreasonable and restricts U.S. commerce. Such a finding would allow Trump to levy retaliatory tariffs.
Trump derided French wines in his tweet, and later said he might hit them with retaliatory tariffs. He made a similar threat last year.
Trump insisted Friday that he has a good relationship with French President Emmanuel Macron and had just spoken with him.
After initially befriending the U.S. president despite their starkly different worldviews, Macron has increasingly clashed with Trump on trade, climate change, and Iran’s nuclear program.
The tech tax is just their latest battleground, and will be a key tension point when the two men meet at a Group of Seven summit in France next month.
France failed to persuade European Union partners to impose a Europe-wide tax on tech giants, but is now pushing for an international deal on it with the G-7 and the 34 countries of the Organization for Economic Cooperation and Development.