France stuck to its plan to tax big multinational technology companies, defying US President Donald Trump’s suggestion that he might impose tariffs on French wine.
“It’s in all of our interest to move toward a just taxation worldwide for digital companies,” French finance minister Bruno Le Maire said in Paris. Wine tariffs and the digital tax are “completely different issues” and shouldn’t be lumped together, he told reporters on Saturday.
It’s the latest face-off between the self-proclaimed “Tariff Man” in the White House and a major European Union economy. The French tax and Trump’s response threaten to further strain transatlantic ties as the US and EU prepare to negotiate a limited trade agreement on industrial goods.
Trump on Friday raised the possibility of “substantial” retaliation against France. “It might be on wine, it might be on something else,” he later told reporters in Washington.
The law signed by President Emmanuel Macron imposes a 3% tax on the revenue of technology giants such as Facebook and Amazon.com. “We tax our companies, they don’t tax our companies,” Trump said.
The tax, retroactive to January, affects companies with at least €750-million in global revenue and digital sales of €25-million in France. While most of the roughly 30 businesses affected are American, the list also includes Chinese, German, British and French companies.
“I’ve always liked American wines better than French wines, even though I don’t drink wine,” the president said Friday. He said he may impose the wine tariffs before a meeting of the Group of Seven meeting in late August.
Tariffs
Trump has imposed or threatened to levy tariffs on several countries to force changes in their trade or immigration policies. Last month, he promised to do “something” about French wine that he said is allowed into the US virtually tariff-free while France imposes duties on US wine, calling the arrangement unfair.
Wine is France’s second biggest export after aerospace equipment. The US is the biggest market, accounting for about a quarter of France’s €13.2-billion in wine exports last year.
Trump has complained about France charging tariffs on US wine in the past without taking action. He tweeted in November that it’s too hard for American wine producers to sell in France but that the US makes it “easy” to import French wines, which he said “must change”.
The US charges a tariff of $0.05 per 750ml bottle of imported still wine and $0.14 for sparkling wine, according to the Wine Institute, an advocacy group for California winemakers. European Union tariffs for imported wine range from $0.11 to $0.29/bottle, according to the group.
France hasn’t backed off from its planned digital tax even after the US suggested it may use trade tools against the levy.
The US has said it will examine whether the tax would hurt its tech firms, using the so-called 301 investigation, the same tool Trump deployed to impose tariffs on Chinese goods because of the country’s alleged theft of intellectual property.
France isn’t alone among European nations in arguing that Internet companies aren’t paying their fair share into public coffers.
Because they’re often domiciled in other countries — including low-tax jurisdictions such as Ireland or Bermuda — and shift money seamlessly across borders, companies that sell online can easily avoid paying taxes in nations where they nevertheless make significant sales.
France argues that the structure of the global economy has shifted to one based on data, rendering 20th century tax systems archaic. According to 2018 figures from the European Commission, global tech companies pay a 9.5% average tax rate compared to 23.2% for traditional firms.
While France is the first EU country to impose such a levy, it said it would prefer an EU-wide digital tax. Some other European countries are considering similar taxes. — Reported by Robert Williams and Josh Wingrove, with assistance from Helene Fouquet, Hamza Ali, William Horobin and Aoife White, (c) 2019 Bloomberg LP