France will be "pugnacious" over new United States tariff threat -minister

Andrew Cummings
December 3, 2019

The plan was announced by the USA trade representative (USTR) on Monday at the conclusion of an investigation into the French digital services tax, which has pitted Donald Trump against Emmanuel Macron, the French president, for months.

This week, a report accused the "big six" tech firms of "aggressively avoiding" $100bn of global tax over the past 10 years by moving sales and profits through low-tax countries and tax havens - such as Bermuda, Ireland, Luxembourg, and the Netherlands.

The rate could also reach 100%. But French Finance Minister Le Maire said ahead of the USTR announcement that the US has backed off from supporting an OECD compromise.

Last October, his administration imposed tariffs on French aircraft, wine, cheese and a range of other European products after the World Trade Organisation gave permission to impose annual levies on £5.8 billion of European exports.

President Trump is scheduled to meet with French President Emmanuel Macron in London on Tuesday on the sidelines of a North Atlantic Treaty Organisation leaders meeting.

U.S. Trade Representative Robert Lighthizer said the U.S. government was also exploring whether to open similar investigations into the digital services taxes of Austria, Italy and Turkey.

France has been one of the most vocal governments to push for taxes to be paid, based on digital activity, not where companies have their headquarters.

The U.S. move is a setback for efforts to stop a conflict over digital tax from intensifying.

"We need to be pugnacious on the subject", she added.

"They've said they aren't sure they want a solution at the OECD", Le Maire said on radio station France Inter.

Senators Chuck Grassley and Ron Wyden, the bipartisan duo leading the Finance Committee, called the French digital services tax "unreasonable, protectionist and discriminatory", in a statement. "We will never abandon our will to tax digital giants in a fair way".

The latest ruling by the U.S. government knocked down leading French luxury-goods stocks.

France's 3 per cent levy applies to revenue from digital services earned by companies with more than €25 million (S$37.8 million) in French revenue and €750 million worldwide.

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