United States could impose tariffs on French imports in retaliation against ‘tech tax’

The logos of Amazon Apple Facebook and Google in a combination

The French digital services tax would impose a 3% annual levy on French revenues of digital companies with yearly global sales worth more than 750 million euros ($844 million) and French revenue exceeding 25 million euros.

Finance ministers and central bankers at a Group of Seven meeting in Chantilly, France next week will discuss global taxation and competition and the digital economy.

On Wednesday, the Trump administration announced an investigation into the tax under the provision used past year to probe China's technology policies, which led to tariffs on $250 billion worth of Chinese imports. It is due to kick in retroactively from the start of 2019.

The three-percent tax will be levied on sales generated in France by multinational firms.

They say a levy is needed because big, multinational internet companies such as Facebook (FB.O) and Amazon (AMZN.O) are now able to book profits in low-tax countries like Ireland, no matter where the revenue originates.

The tech industry warns consumers could pay more.

Finance Minister Bruno Le Maire has said France isn't the only country advancing a tax on digital companies and that using the threat of "blackmail" to stop them is pointless.

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Some of the companies that could be affected include Apple, Facebook and Google. Prior investigations have covered Chinese trade practices and European Union subsidies on large commercial aircraft. Trump's threat to impose a tariff of as much as 25% on European vehicle exports has cast a cloud over the negotiations as well.

"We are merely re-establishing fiscal justice".

"Between allies, I believe we can and must resolve our differences in another way than through threats", he said during his address to the French Senate in the run-up to the vote.

"We want to impose on these new business models the same rules that apply to all other economic activities".

Paris has pledged to drop its tax as soon as an worldwide agreement is reached at the Organisation for Economic Co-operation and Development overhauling decades-old cross-border tax rules for the digital era. This is expected by the end of 2020.

"We applaud the Trump Administration for taking decisive action against France and for signaling to all of America's trading partners that the U.S. government will not acquiesce to tax and trade policies that discriminate against American businesses,"Amazon said".

The legislation should be enacted within 21 days, a spokeswoman for the Senate said, unless the government or lawmakers ask for a final review by the Constitutional Council.

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