U.S. President Donald Trump on has ordered an investigation into France’s planned tax on technology companies, a probe that could lead to the United States imposing new tariffs or other trade restrictions.
Robert Lighthizer, U.S. Trade Representative (USTR) said in a statement that the United State is very concerned that the digital service taxes, which is expected to pass the French senate is an unfair move targeting American companies, adding that the U.S. president as directed an investigation of the effect of the legislation.
Lighthizer said, “The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”
“The United States will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy,” Lighthizer added.
The move gives Lighthizer up to a year to investigate if France’s digital-tax plan would hurt U.S. technology companies.
The “Section 301” investigation will determine if the levy poses an unfair trade practice. Prior investigations have covered Chinese trade practices and European Union subsidies on large commercial aircraft.
French finance minister Bruno Le Maire said in March that a 3 percent tax on the French revenue of large internet companies could yield $563 million a year.
USTR said in a statement the “services covered are ones where U.S. firms are global leaders. The structure of the proposed new tax as well as statements by officials, suggest that France is unfairly targeting the tax at certain U.S.-based technology companies.”
Le Maire said the tax would target some 30 companies, mostly American but also Chinese, German, Spanish and British, as well as one French firm and several firms with French origins that have been bought by foreign companies.
The tax would affect companies with at least $844 million in annual revenues and apply to revenue from digital business including online advertising. Companies such as Google, Apple Inc, Facebook Inc and Amazon.com Inc would likely be subject to the tax.
Technology industry lobby group ITI, which represents Apple, Amazon, Google and other tech companies, urged the United States not to resort to tariffs in the dispute.
“We support the U.S. government’s efforts to investigate these complex trade issues, but urge it to pursue the 301 investigation in a spirit of international cooperation and without using tariffs as a remedy,” Jennifer McCloskey, ITI’s vice president of policy, said in a statement.