France-US digital row: EU minister demands Trump ‘stop threats’ as tax ‘sovereign right’

“This tax is a sovereign choice; a sovereign right. These [digital] companies benefit from our [the bloc’s] single market but yet they do not participate in our market.” She also urged Washington to “stop threatening” to impose retaliatory tariffs on French goods: “Enough with the threats, that is not how things should be between allies.”

The French parliament raised the ire of US President Donald Trump’s administration in July by adopting a law taxing digital behemoths like Google, Apple, Facebook and Amazon for revenues earned inside the country.

Talks to resolve the issue have so far been fruitless and last week Washington threatened to slap tariffs of up to 100 percent on £1.8billion ($2.4billion) in French goods including champagne, cosmetics, handbags and Roquefort cheese.

The issue risks stoking tensions between the two allies, with Paris warning of strong EU retaliation if Washington makes good on its tariff threat.

French Finance Minister Bruno Le Maire told Radio Classique last week: “If there are new American tariffs there will be a European response, a strong response.

“This is not the sort of behaviour one expects from the United States with respect to one of its main allies, France, and to Europe in general.”

On Sunday, M Le Maire warned France would bring the matter to the World Trade Organisation (WTO) if necessary.

M Le Maire told France 3 television: “We are ready to take this to an international court, notably the WTO, because the national tax on digital companies touches US companies in the same way as EU or French companies or Chinese. It is not discriminatory.”

The EU has thrown its support behind France, with commission spokesman Daniel Rosario saying that “as in all other trade-related matters the EU will act and react as one and it will remain united”.

However, Mr Trump told reporters in London last week France has no right to tax US-based tech firms.

He said: “They’re our companies, they’re American companies, I want to tax them, those companies. They’re not going to be taxed by France… If anybody is going to take advantage of American companies it’s going to be us. It’s not going to be France.”

France, backed by Britain and others, says that multinational digital giants must pay taxes on revenues in a country even if their physical headquarters is elsewhere. But Washington argues that US companies have been unfairly targeted.

 The tax imposes a three percent levy on revenue from digital services earned in France by firms with more than €25million (£21 million) in French revenue and €750 million (£630 million) worldwide.

It targets revenue instead of profits, which are often reported by tech firms in low-tax jurisdictions like Ireland or Luxembourg in a loophole that has angered EU governments.

The digital tax is due to kick in retroactively from the start of 2019.

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