France, US seek to stave off the threat of tariffs

Friday, 06 Dec, 2019

France and the European Union are "ready to retaliate" if the United States follows through with threats to slap tariffs on $2.4 billion in imports of champagne, handbags and other French products.

The USTR said that the French DST is "inconsistent with prevailing tax principles" due to its nature of "retroactivity", its application to "revenue rather than income", and its "purpose of penalizing particular us technology companies".

French Finance minister Bruno La Maire said that the European Union would provide a "strong response" if the USA goes ahead with these tariffs. Although it is not created to target USA companies, the majority of big tech companies that operate in France are American.

The 3% tax was passed by the French government in July and applies to companies that make more than $27.86 million in digital domestic revenue and over $830 million worldwide. "This French taxation is not directed at any country, or against any company".

The measure has been seen as retaliation to the French plans to tax major digital giants (included American companies), under the so-called GAFA tax (nicknamed as such after Google, Apple, Facebook and Amazon), which would tax eligible digital companies 3% of their business in France.

U.S. prez Donald Trump is in London this week for the North Atlantic Treaty Organisation summit, as is French president Emmanuel Macron.

It looks like Boris Johnson may be forging ahead with plans to tax big tech companies, even though it could complicate United States trade negotiations.

The French state is set to impose a tax of three percent on any digital company whose revenue exceeds €750 million [$850 million; £670 million], should a minimum of €25 of that revenue be made in France.

French wine and cheese producers expressed dismay about being caught in the middle of the battle over digital revenues.

"The United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies", Ambassador Robert Lighthizer said Monday.

The full list of French products subject to potential duties includes cosmetics, porcelain, soap, handbags, kitchen equipment, butter and several kinds of cheeses, including Roquefort, Edam and Gruyere.

US Trade Representative Robert Lighthizer said the US government was also exploring whether to open similar investigations into the digital services taxes of Austria, Italy, and Turkey.

"If anybody is going to take advantage of American companies it's going to be us".

The findings won favor from USA lawmakers and US tech industry groups, who have long argued that the tax unfairly targets U.S firms.

M Macron, for his part, said he believed he could "settle this situation with President Trump", but stressed he remained "determined to defend the interests" of both France and Europe.

Over the summer, President Donald Trump threatened to tax French wine over the issue - a plan that. Trump said the European Union should "shape up, otherwise things are going to get very tough".

The question is whether Washington will retaliate.

Mr. Macron says taxing big tech more is a matter of social justice.