France hits back at U.S. over tax on big digital companies

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France says the tax is needed because big internet companies such as Facebook and Amazon are able to book profits in low-tax countries no matter where the revenue originates from. The tax will apply a 3% levy on revenue from digital services earned in France by firms with more than €25m (£22.5m) in French revenue and €750m worldwide.

In an unusual move that threatens to worsen trade tensions with Europe, the Trump administration said it will investigate whether a proposed French tax on tech companies discriminates against USA business, a step that could lead Washington to impose trade penalties.

The 301 probe was used on China past year resulting in the United States slapping tariffs on the country, The Washington Post reported.

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

But the French move drew an angry response from Trump even before the legislation was passed, with the president ordering an investigation that the French economy minister said was unprecedented in the history of French-US relations.

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On Wednesday US Trade Representative Robert Lighthizer announced a "Section 301 investigation" into France's digital services tax, a proposed 3pc revenue levy on companies such as Facebook and Google that provide digital services to French users.

French Finance Minister Bruno Le Maire said in March that a 3% tax on the French revenue of major online companies could yield €500 million ($563 million) a year and would include some 30 companies, which were mostly from the USA but also included others from China, Germany, Spain and the UK. Le Maire warned in December that his country would start taxing tech giants at a national level if European Union countries couldn't agree on a joint tax on digital revenues.

France has hit back against United States plans to investigate a planned tax on big digital companies, saying it was free to decide how it applies taxes as a sovereign country.

Google has since defended its global tax payments and said it supports a new "comprehensive and multilateral agreement" on tax.

Amazon called the probe "an important step toward successfully addressing the poorly constructed, discriminatory French (tax), which if implemented, will cause significant harm to American and French consumers alike".

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