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US Threatens to Retaliate Against France’s Digital Tax

Digital Tax France USA

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Following France’s decision to impose a digital tax on large tech companies operating in the country, the Trump administration threatened to set up a special tax on French wine in the US.

President Trump, referring to France’s move as “foolishness,” warned that his administration would proceed with “substantial reciprocal action.”

Trump told reporters last week, “They shouldn’t have done this. I told them, I said, ‘Don’t do it because if you do it, I’m going to tax your wine.’”

Trump added, “I've always liked American wines better than French wines. Even though I don't drink wine. I just like the way they look, ok?"

“American wines are great, and they didn't do the right thing when they start taxing our companies. We tax our companies, they don't tax our companies.”

Trump continued, “They're used to taking advantage of the United States, but not with me as President.”

“It might be a wine, it might be on something else… we'll be announcing that fairly soon.”

France USA digital tax

France Replies to Trump’s Digital Tax Threats

In response, France’s Finance Minister Bruno Le Maire urged the Trump Administration to not conflate tariff disputes with the need for a fair digital tax on tech companies.

“It’s in our interest to have a fair digital tax,” Le Maire said.

“Please do not mix the two issues. The key question now is how we can get consensus on fair taxation of digital activities.”

“We are merely re-establishing fiscal justice. We want to create taxation for the 21st century that is fair and efficient,” Le Maire added. “We want to impose on these new business models the same rules that apply to all other economic activities.”

France’s Minister of Agriculture Didier Guillaume was far less diplomatic when commenting on Trump’s threats.

Guillaume said, “It's absurd, in terms of having a political and economic debate, to say that if you tax the 'GAFAs', I'll tax wine. It's completely moronic.”

Plus, he added, “American wine is not better than French wine.”

France’s new digital tax of 3 percent, which was ratified by Parliament last week, targets tech companies with revenues greater than 750 million Euros and at least 25 million Euros accounted for in the country.

However, if the EU and OECD member states opted to impose a global digital tax, France’s Macron pledged that the country would lift its own tax and work with other countries in the imposition of a more universal levy.

France US digital tax tech industry

Tech Industry and the US Challenge France’s Digital Tax

The French tech industry lobbying group ASIC, whose members include Amazon, Facebook and Google, vowed to challenge France’s new digital tax.

According to Bloomberg Tax, ASIC’s president, Giuseppe de Martino, announced that the group would file a formal complaint with the European Commission, arguing that the tax constitutes “unlawful state aid and breaches the rules of the EU’s internal market.”

Other opponents of the French digital tax, explains Bloomberg Tax, claim the levy “could be vulnerable to state aid challenges because the majority of the companies it targets will be foreign, particularly American,” with only a handful of French companies being affected.

The US has already launched a Section 301 investigation into France’s digital tax, which could be deemed as being discriminatory against US companies.

Judd Deere, a White House spokesperson, said, “The Trump administration has consistently stated that it will not sit idly by and tolerate discrimination against US-based firms.”

“The US trade representative has already launched a Section 301 investigation into France’s digital services tax, and the administration is looking closely at all other policy tools,” Deere added.

Commenting on this new digital tax, US Trade Representative Robert Lighthizer said, “The United States is very concerned that the digital services tax ... unfairly targets American companies.”

“The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies,” he added.

According to Lighthizer, it would be wise for countries to wait for "a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy.”