French Parliament Passes Tax Law on Tech Giants Amid US Investigation

US could impose tariffs on French imports in retaliation against ‘tech tax’

On Wednesday, the Trump administration announced an investigation into the tax under the provision used a year ago to probe China's technology policies, which led to tariffs on $250 billion worth of Chinese imports.

Finance Minister Bruno Le Maire has said France isn't the only country advancing a tax on digital companies and that using the threat of "blackmail" to stop them is pointless. Under Section 301 of the Trade Act of 1974, the president has authority to impose tariffs or take other restrictive measures if it's determined that a foreign country's trading rules are damaging to USA businesses. Prior investigations have covered Chinese trade practices and European Union subsidies on large commercial aircraft.

The French Finance Ministry has estimated that the tax would raise about 500 million euros annually at first - but predicted that collections would rise "quickly".

The new tax would apply to the French revenues of approximately 30 major companies, most of which are US-based.

"France's move to enact a unilateral, national digital tax opens the door to a fragmented, inefficient global tax system that would reduce business certainty and impede innovation, job creation, and economic growth worldwide", Ms Jennifer McCloskey, vice president of policy at ITI, a USA tech-industry association, said in a statement this week.

"The United States would not need to pursue this path if other countries would abandon these unilateral actions and focus their energies on the multilateral process that is underway", the statement added.

The ASIC French lobby representing firms like Facebook, Google, Amazon, Twitter and Airbnb warned of a wider impact. Any digital company with revenue of more than €750 million ($850 million) - of which at least €25 million is generated in France - would be subject to the levy.

Bob Atkinson, president of the Information Technology and Innovation Foundation, issued a statement welcoming Lighthizer's investigation.

Senators Chuck Grassley and Ron Wyden, the top Republican and Democrat on the Senate Finance Committee, sent a letter to Treasury Secretary Steven Mnuchin last month asking him to bolster efforts to convince France to back off from its digital tax.

Lighthizer said the United States "will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the worldwide tax system posed by an increasingly digitized global economy".

In a joint statement, Republican Chuck Grassley of Iowa, who is committee chairman, and Democrat Ron Wyden of OR said: "The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost United States jobs and harm American workers".

Bloomberg Tax reported the investigation earlier, citing two people familiar with the matter.

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