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French Senate approves tax as US opens digital levy probe

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A woman takes a picture with two smartphones in front of the logo of the US multinational technology firm Google during the Vivatech startups and innovation fair in Paris. AFP

PARIS (Reuters) – France’s Senate gave final approval to a tax on big technology companies yesterday, potentially opening up a new front in a trade row between Washington and the European Union.

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President Donald Trump on Wednesday ordered an investigation into the tax, which could lead to the United States imposing new tariffs or other trade restrictions.

“Between allies, we can and should solve our disputes not by threats but through other ways,” Finance Minister Bruno Le Maire told senators before the final vote.

The 3 percent levy will apply to revenue from digital services earned in France by firms with more than 25 million euros in French revenue and 750 million euros ($845 million) worldwide. It is due to kick in retroactively from the start of 2019.

France pushed ahead with the tax after EU countries failed to agree a levy valid across the bloc in the face of opposition from Ireland, Denmark, Sweden and Finland.

“France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign,” Mr Le Maire said.

Other EU countries including Austria, Britain, Spain and Italy have also announced plans for their own digital taxes.

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

Political pressure to respond has been growing as local retailers in high streets and online have been disadvantaged; French President Emmanuel Macron has said that taxing big tech more heavily is an issue of social justice.

However, Irish Finance Minister Paschal Donohoe said in May that national taxes targeting mostly US-based digital firms were “highly likely to exacerbate global trade tensions and damage cross-border trade and investment”, and would make it harder to reach agreement on a global reform.

The ASIC French lobby representing firms like Facebook, Google, Amazon, Twitter and Airbnb warned of a wider impact.

“By attempting to unilaterally overtax American players, Bruno Le Maire has triggered a trade war that penalises French technology today and will penalise tomorrow many sectors that make the French economy successful, including wine, automobiles and luxury,” ACIS president Giuseppe de Martino said .

The digital tax spat is separate from the transatlantic trade row, but could be used by Mr Trump to try to obtain EU concessions on the trade front.

The United States and the EU have threatened to impose billions of dollars of tit-for-tat tariffs on planes, tractors and food in a nearly 15-year dispute at the World Trade Organization over aircraft subsidies given to US planemaker Boeing Co and its European rival, Airbus SE.

Mr Trump has also imposed new tariffs on imports of EU steel and aluminium – and has threatened punitive duties on cars and auto parts if the two sides fail to reach an overall trade deal.

Plans to launch trade talks between Washington and Brussels have, however, been hampered by US tariffs on steel and by EU states’ reluctance to include farm products in the talks.

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