France says sovereign on tax as U.S. opens probe into digital levy
PARIS (Reuters) – France hit back on Thursday against U.S. plans to investigate a planned tax on big digital companies, saying it was free to decide how it applies taxes as a sovereign country.
U.S. President Donald Trump on Wednesday ordered an investigation into the French tax in a probe that could lead to the United States imposing new tariffs or other trade restrictions.
The move opens a new trade dispute with a European ally and comes as the French Senate prepares a final vote on the tax on Thursday.
“For us, (the tax) is totally compliant with international agreements. Countries are sovereign on tax matters. So for us it is inappropriate to use a trade instrument to attack a sovereign state,” a finance ministry source said.
France pushed ahead with the tax after EU countries failed to agree a levy across the bloc in the face of opposition from Ireland and some Nordic countries.
That prompted some other European countries including France, Austria, Britain, Spain and Italy to announce plans for their own tax at the national level.
France says the tax is needed because big internet companies like Facebook and Amazon are currently able to book profits in low tax countries no matter where the revenue originates from.
Paris has pledged to drop its tax as soon as an international agreement is reached at the Organisation for Economic Cooperation and Development overhauling decades-old cross-border tax rules for the digital era.
The French government says the tax does not specifically target U.S. companies and will affect European and Asian firms as well. The tax will apply a 3% levy on revenue from digital services earned in France by firms with over 25 million euros in French revenue and 750 million euros worldwide.
Reporting by Myriam Rivet; writing by Leigh Thomas; editing by Richard Lough