US President Donald Trump has promised to retaliate against France for adopting a pioneering tax on Internet giants such as Google, Amazon and Facebook.
He also managed to take a shot at French wine. Trump, who does not drink, tweeted: “I’ve always said American wine is better than French wine!”
The tax primarily targets companies that use consumer data to sell online advertising. Trump said that if anybody taxes American technology companies, it should be their home country.
He added, referring to French President Emmanuel Macron: “We will announce a substantial reciprocal action on Macron’s foolishness shortly.”
The tax is designed to stop multinationals from avoiding taxes by setting up headquarters in low-tax EU countries. Currently, the companies pay nearly no tax in countries where they have significant sales.
The French law does not specifically target US companies. It targets any digital company with yearly global sales worth more than €750-million and French revenue exceeding €25-million. The revenue threshold is supposed to allow more room for smaller companies to enter the market.
Retaliatory tariffs
However, the Trump administration emphasises that the services covered under the tax are ones in which US firms are global leaders. US trade representative Robert Lighthizer initiated an investigation earlier this month to determine whether the tax is discriminatory or unreasonable and restricts US commerce. Such a finding would allow Trump to levy retaliatory tariffs.
“The Trump administration has consistently stated that it will not sit idly by and tolerate discrimination against US-based firms,” said White House spokesman Judd Deere.
The digital tax has also riled Republican and Democratic members of congress. Leaders of the senate finance committee have urged treasury secretary Steven Mnuchin to explore increasing taxes on French subsidiaries in the US.
France failed to persuade European Union partners to impose a Europe-wide tax on tech giants, but is now pushing for an international deal with the 34 countries of the Organisation for Economic Cooperation and Development.
