US: Gov will probe whether French tax on tech is fair

The US government will investigate whether a French plan to tax American technology companies is fair, and it could potentially issue retaliatory tariffs in response, according to a report by The Financial Times.

The US trade representative, Robert Lighthizer, said that he would carry out a Section 301 investigation into France’s digital services tax. Lighthizer said the tax unfairly spotlights American companies.

The move could potentially lead to tariffs on French items like wine or automobiles, although both parties would have to try and reach a negotiated settlement before it gets to that.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” Lighthizer said. “The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”

A source in the Finance Ministry in France told the FT that the tax was completely compliant with all international agreements and that it wasn’t appropriate to potentially threaten trade tariffs because of it.

On Thursday, July 11, senators in France voted on the passage of the tax, which will put a charge of 3% on a company’s turnover if it has revenues higher than €750 million (US$845.5 million) worldwide and €25 million (US$28.2 million) in France.

Some of the affected companies would include Apple, Facebook, and Amazon, among others.

French President Emmanuel Macron and finance minister Bruno Le Maire have made the idea of “making capitalism fairer” a top agenda item, and they want to make sure that tech companies in France are paying a fair share.

US President Trump was reportedly angered by the tax and viewed it as a direct attack on American businesses. The United States has done a Section 301 investigation before: In 2017, it looked into China’s actions against American technology and intellectual property. As a result, tariffs were increased on Chinese imports to the tune of US$250 billion, which was the catalyst for the current trade war between the two countries.

Jennifer McCloskey, the vice-president of policy at the Information Technology Industry Council, an organization that represents tech companies around the globe, said that stronger measures needed to be taken.

“While we had hoped escalation of this issue could be avoided, we now recognize that countries affected by France’s measure need to take stronger action in order to persuade France and others to refrain from unilateral measures and recommit to the OECD discussions,” she said. “We support the U.S. government’s efforts to investigate these complex trade issues but urge it to pursue the 301 investigation in a spirit of international cooperation and without using tariffs as a remedy.”