Trump promises to retaliate against France’s tech tax

Trump promises to retaliate against France’s tech tax

US President Donald Trump has responded to France’s move to tax US tech giants, saying he will shortly announce “substantial reciprocal action,” according to The Verge.  

“France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”

Later that day at the White House, Trump again suggested that US retaliation could target French wines, saying: 

“I’ve always liked American wines better than French wines. Even though I don’t drink wine.” 

The new French measure was signed into law by President Emmanuel Macron on Thursday, instituting a 3 percent tax on digital revenue generated in France, for companies with over €750 million in global revenue, at least €25 million of which is earned in France. While it doesn’t specifically target American companies, many of the world’s largest digital firms are based in the US, including Amazon, Apple, Facebook, and Google. 

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” said US Trade Representative Robert Lighthizer, when the measure was first passed. 

But the tech giants have been widely accused of avoiding taxes in many of the countries where they earn their revenue, establishing headquarters in nations with low tax rates like Ireland or Luxembourg, even while most of their money is made in nations like France and the UK. Many international tax rules date back to a time in which companies needed physical facilities in a nation in order to do business, and tax requirements are often tied to this brick and mortar presence. 

In its 2017 taxes there, Amazon paid less than 0.1 percent of its UK revenue, which totaled £2 billion. And the UK, Spain, and Italy are considering similar digital taxes, as are Japan, Singapore, and India. The Organization of Economic Development and Co-operation (OECD) is aiming to establish an updated global tax agreement by the end of the year, which would address such concerns and negate measures passed by individual nations. 

Trump’s administration has repeatedly shown a willingness to use retaliatory tariffs to address what it views as unfair trade practices targeting the US. The European Commission is also investigating Amazon for antitrust violations, and the EU has approved new copyright rules that tech companies had opposed. 

Photo: US Embassy France [Public domain]