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US to investigate French proposal to tax tech firms

MORE US TARIFFS?The Office of the US Trade Representative said that the services targeted by the plan are ones in which US firms are global leaders

Reuters, WASHINGTON

US President Donald Trump on Wednesday ordered an investigation into France’s planned tax on technology companies.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow [Thursday] unfairly targets American companies,” US Trade Representative Robert Lighthizer said in a statement announcing the investigation.

The move gives Lighthizer up to a year to investigate whether France’s digital-tax plan would hurt US technology companies.

The “Section 301” investigation is to determine if the levy poses an unfair trade practice. Prior investigations have covered Chinese trade practices and EU subsidies on large commercial aircraft.

French Minister of Finance Bruno le Maire in March said that a 3 percent tax on the French revenue of large Internet companies could yield 500 million euros (US$563 million) a year.

The Office of the US Trade Representative said in a statement that the “services covered are ones where US firms are global leaders. 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.”

Lighthizer said Trump “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.”

Le Maire said the tax would target about 30 companies, mostly 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.

The tax would affect companies with at least 750 million euros in annual revenue and apply to revenue from digital business including online advertising.

Companies such as Alphabet Inc’s Google, Apple Inc, Facebook Inc and Amazon.com Inc would likely be subject to the tax.

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

“We support the US government’s efforts to investigate these complex trade issues, but urge it to pursue the 301 investigation in a spirit of international cooperation and without using tariffs as a remedy,” ITI vice president of policy Jennifer McCloskey said in a statement.

US Senate Finance Committee Chairman Chuck Grassley and US Senator Ron Wyden praised the investigation.

“The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers,” they said in a joint statement.

“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 under way,” the statement added.

Lighthizer said that the US “will continue its efforts with other countries at the OECD [Organisation for Economic Co-operation and Development] to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy.”

Bloomberg Tax reported the investigation earlier, citing two people familiar with the matter.

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