United States to probe French plan to tax tech companies

Andrew Cummings
July 11, 2019

United States President Donald Trump on Wednesday ordered an investigation into France's planned tax on technology companies, a probe that could lead to the U.S. imposing new tariffs or other trade restrictions. The so-called 301 investigation is the same tool President Donald Trump used to impose tariffs on Chinese goods because of the country's alleged theft of intellectual property.

Mr Lighthizer said the United States was concerned that the plans would unfairly target American tech companies, and said it would investigate whether it was discriminatory.

"The fact that these companies pay less tax than a cheese producer in Quercy is a real problem", French Finance Minister Bruno Le Maire, a vocal proponent of the measure, said in an April 3 interview with Le Parisien.

The move comes after US Trade Representative Robert Lighthizer announced the beginning of a probe into France's planned tax on tech giants, adding that Washington is very concerned that the tax would "unfairly target American companies".

But the French move drew an angry response from Trump even before the legislation was passed, with the president ordering an investigation that the French economy minister said was unprecedented in the history of French-US relations. The Organization for Economic Cooperation and Development is working on a global solution on taxation for digital companies by 2020.

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". The section 301 investigation, which is being run by the U.S. trade representative's office, has said it will hold hearings to allow for public comment on the French tax issue for several weeks before issuing a final report. The levy could affect USA companies including Airbnb and Uber as well as those from China and Europe. Lighthizer's agency will investigate the tax under Section 301 of the Trade Act of 1974.

Plans to launch trade talks between Washington and Brussels have, however, been hampered by US tariffs on steel and by European Union states' reluctance to include farm products in the talks. "They can go after products where they have leverage".

Republican Senate Finance Committee Chairman Chuck Grassley and Ron Wyden, the senior Democratic Party member on the panel, for their part, hailed the investigation. The lawmakers urged the U.S.to look at "all available tools under USA law to address such targeted and discriminatory taxation". Currently, the companies pay almost no tax in countries where they have large sales like France. Trump's threat to impose a tariff of as much as 25% on European vehicle exports has cast a cloud over the negotiations as well.

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