Monday 23 September 2019

France forges ahead with tech tax despite Trump threats

French Finance Minister Bruno Le Maire. Photo: Reuters
French Finance Minister Bruno Le Maire. Photo: Reuters

Angela Charlton

France is pushing ahead with a landmark tax on tech giants like Google and Facebook - despite Donald Trump's threats of retaliatory tariffs on French wine.

After Trump slammed the "foolishness" of the tax in a tweet last Friday and promised reciprocal action, French finance minister Bruno Le Maire said France would implement it anyway.

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He added: "The universal taxation of digital activity is a challenge that concerns us all." He said the tax is meant as a temporary measure pending negotiations on an international tax deal. The 3pc tax, which went into force last week, mainly concerns companies that use consumer data to sell online advertising.

It's designed to stop multinationals from avoiding taxes by setting up European headquarters in low-tax EU countries. Currently, companies such as Google, Amazon, Facebook, Apple, Airbnb and Uber pay very little tax on their significant business in countries like France. Most of these companies maintain their European headquarters in Ireland.

The Trump administration says the proposed new French tax is discriminatory against US business.

But the tax targets any digital company with yearly global sales worth more than €750m and French revenue exceeding €25m. It should affect about 30 companies, based in the US, China and Europe - including France.

The revenue threshold is supposed to allow more room for start-ups. France argues that tech giants are abusing their market dominance, notably through tax avoidance, and preventing others from a fair chance of competing.

The tax only concerns revenues earned in France - not sales elsewhere.

Trump derided French wines in his tweet, and later said he might hit them with retaliatory tariffs. He made a similar threat last year.

Last Friday Trump insisted that he has a good relationship with French President Emmanuel Macron and had just spoken with him.

After initially befriending the US president, Macron has increasingly stood up to Trump on trade, climate change and Iran's nuclear programme.

The tech tax is just their latest battleground, and will be a key item for discussion when the pair meet at a G7 summit in France next month.

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