A new tax on digital and internet services that passed the French Senate yesterday will be investigated by the US over concerns it unfairly targets the country’s tech giants.
Some commentators claim Australia may soon have to follow suit, but a Treasury paper last year warned any tax on digital companies could spark retaliation from the US.
US President Donald Trump ordered the investigation, which could result in him imposing tariffs or other trade restrictions.
The retroactive tax will impose a 3 per cent levy on digital services firms with revenue exceeding €25 million in France and €750 million worldwide, dating back to the start of this year.
The French tax comes after the European Union failed to agree on a levy when several countries voiced their opposition, including Ireland, which many digital companies such as Facebook, Google and Microsoft have been using as a quasi-tax haven thanks to low corporate tax rates on profits from intellectual property.
Austria, Britain, Spain and Italy have reportedly announced plans for their own tech taxes following the French decision according to Reuters.
US Trade Representative Robert Lighthizer said his nation is concerned the digital services tax unfairly targets American companies.
“The services covered are ones where U.S. firms are global leaders,” said a statement from the Office of the US Trade Representative.
“The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies.”
Robert Lighthizer
Mr Lighthizer’s office will hear comments from the public on the issue over several weeks and issue a final report recommending what action to take.
The French government dismissed claims the tax targets US companies, saying it will also impact on European and Asian firms.
An international agreement on cross-border tax rules following the rise of the digital era is expected to be one focus of the Organization for Economic Cooperation and Development, with an accord expected before the end of next year.
France says it will drop the new tax once that worldwide agreement is finalised.
