United States to probe French plan to tax tech companies

US could impose tariffs on French imports in retaliation against ‘tech tax’

In an unusual move that threatens to worsen trade tensions with Europe, the Trump administration said it will investigate whether a proposed French tax on tech companies discriminates against USA business, a step that could lead Washington to impose trade penalties.

This comes after US Trade Representative Robert Lighthizer announced that he was launching an investigation into France's planned tax on tech giants. Under Section 301 of the Trade Act of 1974, the president has authority to impose tariffs or take other restrictive measures if it's determined that a foreign country's trading rules are damaging to USA businesses.

France has pressed ahead with a pioneering new tax on tech companies like Google, Amazon and Facebook, despite USA threats of new tariffs on French imports.

He said in a statement that "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 measure is close to passing both houses of Parliament and could soon be signed by President Emmanuel Macron, who has voiced support for the tax.

Finance ministers and central bankers at a Group of Seven meeting in Chantilly, France next week will discuss worldwide taxation and competition and the digital economy.

The tax would affect companies with at least 750 million euros ($844m) in annual revenues and apply to revenue from digital business including online advertising.

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The lawmakers included a suggestion to use a section of the tax code that would double the rate of US taxes on French citizens and companies in the U.S. The UK, Spain, Italy, and Austria are considering similar sales taxes, raising the question of how the United States will respond if they take effect.

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

The French government says the tax does not specifically target U.S. companies and will affect European and Asian firms as well.

"If these two criteria are not met, the taxes will not be imposed", Le Maire said.

Trump has also imposed new tariffs on imports of European Union steel and aluminum - and has threatened punitive duties on cars and auto parts if the two sides fail to reach an overall trade deal.

"Between allies we can and should solve our disputes not by threats but by other means", Le Maire told senators.

Amazon called the probe "an important step toward successfully addressing the poorly constructed, discriminatory French (tax), which if implemented, will cause significant harm to American and French consumers alike".

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