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French Parliament Passes Tax Law on Tech Giants Amid US Investigation

11 July 2019

The investigation illustrates growing alarm among U.S. officials and industry executives about the prospect of new taxes on technology giants spreading beyond France. The tax will apply a 3% levy on revenue from digital services earned in France by firms with more than €25m (£22.5m) in French revenue and €750m worldwide.

France on Thursday became the first major economy to impose a tax on digital giants, with parliament passing the legislation in defiance of a probe ordered by President Donald Trump that could trigger reprisal tariffs.

Section 301 investigations often result in tariffs if they find that the United States has been unfairly targeted.

"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies", US Trade Representative Robert Lighthizer said in a statement Wednesday announcing the investigation.

The legislation - dubbed the GAFA tax - an acronym for Google, Apple, Facebook and Amazon - was passed by a simple show of hands in the Senate upper house after previously being passed by the National Assembly lower chamber. In a joint statement, Republican Chuck Grassley of Iowa, committee chairman, and Democrat Ron Wyden of OR said: "The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost and harm American workers".

France has hit back against U.S. plans to investigate a planned tax on big digital companies, saying it was free to decide how it applies taxes as a sovereign country.

"The fact that these companies pay less tax than a cheese producer in Quercy is a real problem", French Finance Minister Bruno Le Maire, a vocal proponent of the measure, said in an April 3 interview with Le Parisien.

The tech industry warns it could lead to higher costs for consumers.

The UK chancellor, Philip Hammond, promised to introduce a digital sales tax in his budget past year to ensure that "global giants with profitable businesses in the UK pay their fair share".

Google on Wednesday defended its global tax payments and voiced support for a new "comprehensive and multilateral agreement" on tax, rather than "discriminatory unilateral taxes". The decision comes after Washington launched a probe into the tax.

Facebook and Apple declined to comment.

French Parliament Passes Tax Law on Tech Giants Amid US Investigation