The French finance ministry has slammed a US call for an inquiry into France's "Gafa" bill which would impose a full rate of tax on leading tech firms Google, Apple, Facebook and Amazon. The treasury in Paris is outraged at the US hinting at hiking tax on French goods as a retaliatory measure.
The French bill to tax the Gafa firms – Google, Apple, Facebook and Amazon, all of them US-based – does not contravene any international agreements, says the French economy and finance ministry.
According to the ministry, it would therefore be unjustifiable for Washington to take trade reprisals against France.
"Countries have sovereign rights over their fiscality. So we believe that using retaliatory trade measures to attack another State's sovereignty is not appropriate," said a ministry source.
Potential strike back
On Wednesday, US president Donald Trump commissioned his adminstration to carry out an inquiry into the French tax bill and depending on their conclusions, could lead to customs hikes on French goods, or other trade reprisals.
The US Trade Representative, Robert Lighthizer said, "The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies."
Lighthizer has one year to assess the potential of France's digital-tax plan to harm US technology companies.
Both Republicans and Democrats have hailed Trump's call for an inquiry. Two members of the Senate Finance Committee said it is, "clearly protectionist ... and will cost US jobs and harm American workers."
The Gafa bill has already been passed in the French lower house of parliament and on Thursday is on the table in the right-wing majority Senate. It is expected to pass without any objections.
In brief, the new tax would apply to digital firms which derive value from French web surfers. The tax would be levied from the Gafa-four but would stretch to include about 30 firms, including Airbnb, Meetic or Instagram.
The French government hope to raise 400 million euros from taxing firms who earn more than 750 million euros worldwide and more than 25 million euros out of France by levying three percent of that amount retroactively from 1st January 2019.
French finance minister Bruno Le Maire has said that France would abolish the future tax when digital firms are subjected to an international tax.
France meanwhile is taking the lead. In June in Japan, the G20 countries' finance ministers agreed in principle on a similar law to tax the so-called Gafa firms.
The European Union had mooted the idea first, but was blocked by Ireland, Sweden, Denmark and Finland, from pursuing.