Published: Tue, December 03, 2019
Markets | By Otis Pena

United States threatens 100pc tariffs on French goods over digital tax 'discrimination'

United States threatens 100pc tariffs on French goods over digital tax 'discrimination'

"France's digital services tax discriminates against USA companies", the office of the United States Trade Representative said in a statement Monday.

The French digital tax aims prevent tech companies from dodging taxes by reporting their earnings in low-tax European Union countries.

Gruyere cheese, also spared from the USTR aircraft tariffs levied in October, featured prominently in the list of French products targeted for 100% duties, along with numerous other cheeses.

Le Maire told Radio Classique on Tuesday that the United States threat was unacceptable.

France and the European Union are ready to fight back over the latest United States tariff threats on French products, French government ministers said on Tuesday (Dec 3).

U.S. Trade Representative Robert Lighthizer said the government was exploring whether to open similar investigations into the digital services taxes of Austria, Italy and Turkey.

The U.S. tariffs and the French tax are likely to be a priority during a meeting between Trump and Macron on Tuesday, on the sidelines of a North Atlantic Treaty Organisation conference in London.

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France's tax, retroactive to January, affects companies with at least 750 million euros ($830 million) in global revenue and digital sales of 25 million euros in France.

Mr Lighthizer's office investigated Mr Macron's tax under Section 301 of the Trade Act of 1974 - the same mechanism Mr Trump's administration used a year ago to look into China's tech policies.

However, despite Trump's repeated threats to retaliate against French wines, only sparkling wine made the tariff list.

France has been one of the most vocal governments to push for taxes to be paid, based on digital activity, not where companies have their headquarters.

While applauding the USTR investigation, Jennifer McCloskey of tech industry lobby group Information Technology Industry Council said she would prefer to avoid "a strong trade response".

The U.S. move is a setback for efforts to stop a conflict over digital tax from intensifying. "We need to be pugnacious on the subject". With talks between Washington and Paris not yielding much result, however, France's Senate gave the final approval for it last month.

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