US President Donald Trump’s administration has threatened to levy import taxes on $2.4bn (€2.2bn) worth of French goods, including Champagne and French cheeses, in retaliation to the country’s new digital services tax.
Mr Trump’s administration says the tax penalises firms like Google, Amazon and Facebook and, in retaliation, is proposing up to 100 per cent on French products, including cheese, champagne and handbags.
France’s digital tax has been designed to prevent technology firms from dodging their fair share of taxes.
French Minister Bruno le Maire has reportedly called the US threat “unacceptable.” He told a French radio station on Tuesday that “In case of new American sanctions, the EU would be ready to riposte”.
On Monday, US Trade Representative Robert Lightizer reportedly said that the proposed tariffs on French goods are aimed at deterring other countries from introducing similar tech-company tax laws.
Mr Lightizer is reportedly commented that the tariff proposal “sends a clear signal that the US will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies”.
Before tariffs are officially confirmed, there will now be a period for public comment within the US, including a hearing in Washington in January.
The French tax has been designed in such a way as to stop big tech companies from avoiding tax by placing their headquarters in low-tax European countries. It imposes a three per cent tax on any digital company with revenue of more than €750m – of which at least €25m is generated in France.
The US condemned the law as being inconsistent with international tax practices and “unusually burdensome” for US technology firms. Mr Lightizer remarked that the US is exploring opening investigations into similar laws in Austria, Italy and Turkey. The United Kingdom has also taken steps towards a technology company tax.
“The US Trade Representative is focused on countering the growing protectionism of EU member states, which unfairly targets US companies, whether through digital services taxes or other efforts that target leading US digital services companies,” he said.
France has consistently argued that taxes should be based on digital activity, not simply where the firms have their headquarters. The tax law has been designed to go into effect retroactively from early 2019 and is expected to raise about €400m this year.
It is being envisioned that 30 companies will be impacted by the tax, mostly US firms, such as Alphabet, Apple, Facebook, Amazon and Microsoft. Amazon has retaliated by raising fees for French businesses by three per cent.