GAFA Tax: Trump Is Threatening to Raise Tariffs on France Again

Donald Trump promised Tuesday not to let France tax US companies by threatening trade sanctions again, which Paris said were “unacceptable”.

International Trade
International Trade

“I will not let France take advantage of American companies,” said Donald Trump in London, where he will attend the NATO summit.

The day before, the U.S. threatened to tax the equivalent of $2.4 billion in French products, including champagne and cheese, in retaliation for the tax that Paris imposed on digital companies under a law passed in July.

“These sanctions would be unacceptable,” said the French Minister of Economy and Finance, contesting the legal validity of these reprisals.

“The French tax is not discriminatory;  It includes American companies, but also French, European and Chinese companies”, Bruno Le Maire told the press in Paris.

“Secondly, we question the very principle of sanctions, because it is not the right policy, the right path to take between allies. But the United States should know that if they engage in a new set of sanctions against France, the European Union would be willing to react firmly,” he continued, supporting the implementation of the project proposed by the Organization for Economic Cooperation and Development (OECD).

“If the US administration says yes to the proposed taxation of digital activities negotiated in the OECD and on the table, there is no longer any difficulty. France will withdraw its international tax, as promised,” added Bruno Le Maire, who will meet EU Trade Commissioner Phil Hogan in Brussels on Wednesday.

In Brussels, the European Commission assured that EU Member States would show solidarity with France. “In this case, as in all trade matters, the European Union will act and react in unison and remain united,” promised a spokesman.

On the financial markets, French luxury stocks are suffering. World leader LVMH, Kering and Hermès have lost more than 2%.

The Stoxx index, which includes most of the major European players in the sector, has lost about 0.8%. The largest sectoral decline was recorded in the commodities sector, with a decline of 1.7%.

The French tax, which is aimed at digital giants such as Google, Apple, Facebook and Amazon – hence its nickname “Gafa tax” – applies to companies with a worldwide turnover of 750 million euros and over 25 million euros on French soil as part of their digital activities.

The Office of the US Trade Representative (USTR) considers that “it does not respect the principles of international tax policy and constitutes an abnormal burden for the American companies concerned”.

It established a list of products, including champagne, bags, makeup products or cheeses, which can be subject to surcharges of up to 100%.

In a statement, the Federation of Wine and Spiritual Exporters of France (FEVS) calls for “urgent action” by the French government to address these “new threats” to the sector.

“We obviously regret this announcement that, after the Airbus conflict, it is once again directed at French wines and always in the context of a conflict between France and the United States that has nothing to do with our sector”, says Antoine Leccia, President of the FEVS.

With almost 700 million euros, sparkling wines represent almost 40% of total French wine exports to the United States in the last twelve months, the FEVS recalls.

“If confirmed, U.S. duties would affect a sector already heavily affected by the 25% duties imposed by the U.S. on wines still since October 18.

This summer, the USTR opened an investigation under section 301 of the 1974 Trade Act, the purpose of which is to determine the fairness of trade practices vis-à-vis American companies.

“The USTR is committed to combating the growing protectionism of EU Member States that unfairly target US companies,” says Robert Lighthizer, US Trade Representative, in a statement.

A period of public consultation on the list of French products that may be subject to surcharges will end on January 14, its services said, without anticipating the date of entry into force of the sanctions.

The list includes products that have been saved by the 25% customs duties imposed in October by the United States in the dispute over potential EU subsidies to Airbus.

GAFA Tax in The News:

Tech Giants Taxation: G20 Paves the Way for Key OECD Negotiations

Elimination of Tax Loopholes Used by Multinationals Is in Sight

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