US Threatens France With Sanctions Over Proposed ‘Unfair’ Tax on Tech Giants

The probe could pave the way for the imposition of tariffs- something Mr Trump has done repeatedly since taking office

"The United States is very concerned that the digital services tax. unfairly targets American companies", the U.S. trade representative said on Wednesday.

Legislators call it a tax on Les Gafa - the acronym for Google, Amazon, Facebook and Apple - companies that France has accused of paying insufficient income tax.

The French Senate has approved a proposed 3 per cent tax on the revenues that tech giants raise within France.

The tax could lead to trade penalties from Washington as President Trump's probe is also likely to worsen tension between the USA and Europe.

Air France said the new tax would significantly hurt its competitiveness and represent an additional cost of over €60 million per year.

If passed, the tax will affect companies with at least Euro 750 million in annual revenues and apply to revenue from digital businesses, including online advertising.

France's Senate gave the final approval to a tax on big technology companies with revenue of more than €750m of which at least €25m generated in France.

Before the vote, French finance minister Bruno Le Maire said the tax would also affect firms from China, Germany, Spain and the United Kingdom.

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The French government has been arguing that tech giants hardly pay any tax in France.

The French finance minister pointed out France is a sovereign nation that can make its own decisions regarding taxes, and said threatening tariffs is not the way to go.

In government documents seen by Yahoo Finance UK, officials said there is a "misalignment" in global tax rules between where companies now pay their taxes and where they profit from their users.

The French have reacted angrily to the news of the investigation and said it was free to decide how it applies taxes as a sovereign country. The probe was launched under Section 301 of the US Trade Act of 1974.

A U.S. tech-industry trade association this week criticised the French measure, saying tax disputes should be settled through a multilateral negotiation now being led by the Organisation for Economic Cooperation and Development. The levy could affect US companies including Airbnb and Uber as well as those from China and Europe.

Another US trade group, the Computer and Communications Industry Association, also said the French proposal discriminated against American companies.

The 301 probe was used on China past year resulting in the U.S. slapping tariffs on the country, The Washington Post reported.

Senate Finance Committee Chairman Chuck Grassley, a Republican, and Senator Ron Wyden, the top Democrat on the panel, praised the investigation. Perhaps it might even prompt countries to finally agree on some common tax rules (imagine that).

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