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France passes law to tax tech companies, despite US investigation

France passes law to tax tech companies, despite US investigation
By Rachael Kennedy with Reuters
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France has passed a new law to tax tech companies after the US announced its investigation into the proposal.


France's parliament has passed a new law to introduce a tax on digital tech giants, despite the US earlier vowing to investigate the "unfair" decision.

The new law, which would see a 3% tax applied to the French revenue of large internet companies, could raise €500 million each year.

French Finance Minister Bruno Le Maire says it would target around 30 companies — most of which are American, but also Chinese, German, Spanish and British, as well as one French firm and several firms with French origins that have been bought by foreign companies.

It would also affect companies with at least €750 million in annual revenue and would apply to income from digital businesses including online advertising.

Companies such as Alphabet's Google, Apple, Facebook and would likely be subject to the tax.

US President Donald Trump has ordered a probe into the tech tax, which could result in France being slapped with new tariffs or trade restrictions.

Announcing the investigation on Wednesday, US Trade Representative Robert Lighthizer said the US was "very concerned" by the law that "unfairly targets American companies".

The move gives Lighthizer up to a year to investigate if France's digital-tax plan would hurt US technology companies or pose an unfair trade practice.

'France is a sovereign country'

A prior investigation has looked into European Union subsidies on large commercial aircraft.

Ahead of the law being passed on Thursday, Le Maire warned the US that tax disputes could not be resolved "by threats".

He said: "Between allies, we can and should solve our disputes not by threats, but through other ways."

"France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign."

Technology industry lobby group ITI, which represents Apple, Amazon, Google and other tech companies, urged the United States not to resort to tariffs in the dispute.

It said: "We support the US government’s efforts to investigate these complex trade issues but urge it to pursue the 301 investigations in a spirit of international cooperation and without using tariffs as a remedy."

But Senate Finance Committee Chairman Chuck Grassley, a Republican, and Senator Ron Wyden, the top Democrat on the panel, has praised the investigation.

In a joint statement, the panel said the probe was "clearly protectionist" and would "cost US jobs and harm American workers".

It added: "The United States would not need to pursue this path if other countries would abandon these unilateral actions and focus their energies on the multilateral process that is underway."

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