France adopted a pioneering tax on internet giants like Google, Amazon and Facebook on Thursday, despite U.S. threats of new tariffs on French imports.
The final vote in favor of the tax in the French Senate came hours after the Trump administration announced an investigation into the tax under the provision used last year to probe China’s technology policies, which led to tariffs on $250 billion worth of Chinese imports.
”Between allies, we can, and we should, solve our differences without using threats,” Bruno Le Maire said. “France is a sovereign country. It will make its own sovereign decisions on fiscal measures.”
The tax amounts to a 3% annual levy on the French revenues of digital companies with yearly global sales worth more than 750 million euros ($844 million) and French revenue exceeding 25 million euros. The tax primarily targets those that use consumer data to sell online advertising.
”Each of us is seeing the emergence of economic giants with monopolistic attributes and who not only want to control a maximum amount of data and make money with this data, but also go further than that by, in the absence of rules, escaping taxes and putting into place instruments that could, tomorrow, become a sovereign currency,” Le Maire said.
The French Finance Ministry has estimated that the tax would raise about 500 million euros annually ($563 million) at first — but predicted fast growth.
The tech industry is warning that consumers could pay more. U.S. companies affected included Airbnb and Uber as well as those from China and Europe.
The bill aims 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 large sales like France.
France failed to persuade EU partners to impose a Europe-wide tax on tech giants, but is now pushing for an international deal with the 34 countries of the Organization for Economic Cooperation and Development.
”The internet industry is a great American export, supporting millions of jobs and businesses of all sizes. Global tax rules should be updated for the digital age — and there is a process to do so underway at the OECD — but discriminatory taxes against U.S. firms are not the right approach,” said Jordan Haas of the Internet Association, an industry trade group whose members include Facebook, Google and Uber.
Another U.S. trade group, the Computer and Communications Industry Association, also said the French proposal discriminated against American companies.
The U.S. investigation got bipartisan support from the top members of the Senate Finance Committee. In a joint statement, Republican Chuck Grassley of Iowa, committee chairman, and Democrat Ron Wyden of Oregon said: “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 U.S. jobs and harm American workers.”
Also on Thursday, Britain moved ahead with similar plans as the government published draft legislation for a “digital services tax.” Starting in April, search engines, social media platforms and online marketplaces that “derive value from U.K. users” will be subject to a new 2% percent tax.
Small companies and unprofitable startups will also be spared in the British proposals. The levy will apply to companies with more than 500 million pounds ($626 million) in revenue, if more than 25 million pounds comes from British users.
The tax is temporary and would be replaced by a global deal, which Britain has also been pushing for through the OECD and the Group of 20 major economies.