Published: Wed, December 04, 2019
Money | By Ethel Goodwin

U.S. threatens huge tariffs on French goods over digital tax

The Trump administration has threatened to slap 100pc tariffs on up to $2.4bn (£1.9bn) of French goods in retaliation to the country's digital tax against United States tech companies.

"France's digital services tax discriminates against US companies", the office of the United States Trade Representative said in a statement Monday.

The list of French products subject to potential duties includes cosmetics, porcelain, soap, handbags, butter, and several kinds of cheeses, including Roquefort, Edam and Gruyere.

The trade agency said it would collect public comments on its proposed tariff list through January 14 and hold a public hearing on January 7.

French Finance Minister Bruno Le Maire already said on French radio that such tariffs could lead to a "strong European riposte".

The findings won favor from US lawmakers and USA tech industry groups, who have long argued that the tax unfairly targets U.S firms.

Lighthizer warned that the also exploring whether to pursue Section 301 investigations into digital taxes introduced by Austria, Italy and Turkey.

The USTR report "concluded that France's Digital Services Tax (DST) discriminates against US companies, is inconsistent with prevailing principles of worldwide tax policy, and is unusually burdensome for affected US companies".

The French Parliament passed a new law on July 11 to impose a tax on digital giants, including USA companies Google, Amazon, Facebook and Apple, and its finance minister cited that the tax is necessary to make internet giants pay their fair share of taxes.

The tariff spat marks a new low in relations between French President Emmanuel Macron and Trump, who will meet on the sidelines of the North Atlantic Treaty Organisation summit later on Tuesday. It only targets businesses with yearly global sales of over €750 million and make over €25 million in France.

The United States has already imposed 25pc duties on French wine and cheese as part of its WTO-sanctioned response to illegal European Union aircraft subsidies, a move exporters warned would penalise U.S. consumers while severely hurting French producers.

Gruyere cheese, also spared from the USTR aircraft tariffs levied in October, featured prominently in the list of French products targeted for 100% duties, along with numerous other cheeses. With talks between Washington and Paris not yielding much result, however, France's Senate gave the final approval for it last month.

"We can see that the United States is shifting into reverse", Le Maire said, reported AFP, adding that while the U.S. had expressed interest in an "international solution" from the Organization for Economic Co-operation and Development, Washington "now isn't sure it wants one".

The new law, which is set to retroactively go into effect from early 2019, will see a 3% tax imposed on revenue of digital services that happen within France.

The tech trade group ITI said it welcomed the administration's decision and urged continued negotiations on global taxes under the auspices of the Organization for Economic Cooperation and Development.

The U.S. government has announced it may slap tariffs of up to 100% on some French imports in retaliation for a French digital tax.

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