France levies 3 percent tax on major tech firms

France levies 3 percent tax on major tech firms

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 UK government unveiled plans for a tax on global tech firms hours after the French senate voted to approve a similar levy - despite US President Donald Trump's opposition. It is expected to raise about €500 million a year.

Any digital company with a revenue of more than 750 million euros - of which at least 25m is made in France - would be subject to the tax.

France's lower house of parliament approved the pioneering tax last week.

US Trade Representative Robert Lighthizer said: "The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce".

Addressing potential USA tariffs in comments before the Senate vote Thursday, French Finance Minister Bruno Le Maire said: "Between allies, we can and should solve our disputes not by threats but through other ways". Jesse Norman, a U.K. Treasury minister, said in a statement that "this targeted and proportionate digital services tax is created to keep our tax system in this area both fair and competitive, pending a longer-term worldwide settlement".

The French government has been arguing that tech giants hardly pay any tax in France. "The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US -based technology companies".

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France has passed a controversial tax bill targeting tech giants, the first of its type from one of the world's major economies. Amazon, Apple and Facebook are among the firms that would be affected.

"France is a sovereign state, it decides sovereignly its fiscal arrangements, and it will continue to make fiscal decisions sovereignly", Le Maire said Thursday at the Senate.

Such a move is supported by Google which believes it would mean Silicon Valley tech giants would pay less tax in the USA and more in other jurisdictions, in a departure from the longstanding practice of paying most taxes in a company's home country.

"For us, [the tax] is totally compliant with global agreements".

Despite U.S. pressure, French officials stood firm on Thursday, brushing off the criticism.

France on Thursday adopted a tax on internet giants like Google, Amazon and Facebook despite US threats to use a favorite tool of the Trump administration: tariffs. Previously, the Trump administration had used Section 301 to probe China's technology policies, which allowed for billions in tariffs on Chinese imports.

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