Quarterly Business Magazine

France to Tax Facebook, Google In Spite of U.S. Trade Threat

Posted :
Saturday, July 13, 2019

France won’t back off from its planned tax on companies like Facebook Inc. and Alphabet Inc.’s Google even after the U.S. suggested it may use trade tools against the levy.

The French Senate passed a bill on Thursday to impose a 3% tax on global tech companies with at least 750 million euros ($845 million) in worldwide revenue and digital sales totaling 25 million euros in France. The U.S. said Wednesday that it will examine whether the tax would hurt its tech firms, using the so-called 301 investigation, the same tool President Donald Trump deployed to impose tariffs on Chinese goods because of the country’s alleged theft of intellectual property.

France said the digital tax is in keeping with international rules, and that it won’t accept the use of trade tools to try to thwart it.

“I deeply believe that between allies we can and must resolve our differences in ways other than with threats,” Finance Minister Bruno Le Maire said in a speech in the Senate. “France is a sovereign state that decides its tax measures with sovereignty and will continue to take sovereign tax decisions.”

With the passage of the bill, France will become the first country in the European Union to impose such a levy, with other nations, including the U.K. and Germany, mulling similar taxes. A broad, EU-wide digital tax failed to garner a consensus in the 28-nation bloc this year, with France among the biggest advocates of a region-wide tax on tech companies’ revenue from digital advertising, user data sales and the like -- the so-called GAFA tax (after Google, Apple Inc., Facebook and Amazon.com Inc.).

 

 

First Investigation

The law, which goes into effect retroactively as Jan. 1, 2019, targets about 30 companies around the world. While most of them would be American, the list would also include Chinese, German, U.K. and even French firms. It would affect companies that profit from providing digital services to French users.

President Emmanuel Macron has two weeks to sign off or seek changes to the law. French presidents rarely modify laws once they are passed by parliament. It has only happened three times in the last 40 years.

Le Maire said he spoke to U.S. Treasury secretary Steven Mnuchin Wednesday, and noted that it’s the first time in the history of relations between the two countries that Washington has opened a 301 investigation against France.

Trade Tensions

The passage of the tax bill and the U.S. investigation threaten to further strain trans-Atlantic ties as the two sides prepare to negotiate a limited trade agreement on industrial goods. The French government has in the past asked the U.S. to work with Europe at the OECD for a “fair digital tax.”

Those OECD talks have accelerated in recent months. Le Maire reiterated that France would abolish its revenue tax if an OECD accord is reached. In May, the minister said he was optimistic for an agreement this year.

“My message to our American partners is that (the tax) should encourage them to accelerate even more the work on an international digital tax solution at the OECD level,” Le Maire said Thursday.

By William Horobin and Helene Fouquet
(Bloomberg)

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