France angers U.S. with approval of tax targeting tech giants

Evarado Alatorre
Julio 14, 2019

In a statement announcing an investigation into France's tax, the U.S. Trade Representative said the measure "unfairly targets American companies".

Le Maire pointed out to the French senate that "France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign".

Economy class tickets on flights within France or the European Union will have a tax of €1.50 imposed.

Many global tech companies pay taxes in the countries where their headquarters are based, rather than where they generate sales. French senators approved the so-called GAFA tax, an acronym for Google, Apple, Facebook and Amazon, on Thursday.

Lighthizer said the U.S. president had directed the investigation find out whether the tax is "discriminatory or unreasonable and burdens or restricts United States commerce".

The tax faced criticism from tech executives, who said it would damage French President Emmanuel Macron's attempt to transform the country into a "start-up nation".

The Section 301 probe will hold hearings to allow for public comment on the French tax issue for several weeks before issuing a final report.

The Trump Administration is pushing the Senate to vote on a series of long-awaited updates to worldwide tax treaties - one show of its efforts to work with other nations in developing such levies on a global scale, according to the New York Times.

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The proposed tax was first mentioned in the October budget after concerns were raised that tech giants don't pay enough tax in the United Kingdom, in comparison to United Kingdom companies.

But the plan is still years away from implementation.

The French government has tried to tighten environmental regulation, but previous year abandoned its plans for fuel tax rises after the widespread protests from the "yellow vests" ("gilets jaunes").

"The government still believes the most sustainable long-term solution to the tax challenges arising from digitalization is reform of the global corporate tax rules", the United Kingdom government said in a statement. The Organization for Economic Cooperation and Development (OECD) is now reviewing steps to modernize the tax system for the digital economy but has said it won't reach a conclusion until 2020.

Brexit may complicate plans to implement the tax, however.

The tax places a two percent levy on UK-derived revenue for companies affected, on top of existing taxes including VAT and corporation tax.

The adoption of the law came as Britain unveiled draft legislation for a tax on digital giants, that would amount to 2.0 percent and reflect "the value derived from their United Kingdom users", the British government said.

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