France passes law taxing digital giants in defiance of US anger

The logos of Amazon Apple Facebook and Google in a combination

On Wednesday Donald Trump ordered an investigation into the French tax, a probe that could lead to the U.S. imposing tariffs or other trade restrictions.

"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies", USA trade representative Robert Lighthizer said in a statement.

Any digital company with a revenue of more than 750 million euros - of which at least 25m is made in France - would be subject to the tax.

The "Section 301" investigation will determine if the levy poses an unfair trade practice. 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 almost 15-year dispute at the World Trade Organization over aircraft subsidies given to US planemaker Boeing Co (BA.N) and its European rival, Airbus SE (AIR.PA).

The French Senate estimated that the tax could bring in €400 million ($588 million Cdn) this year and €650 million ($955 million) next.

But the French move drew an angry response from Trump even before the legislation was passed, with the president ordering an investigation that the French economy minister said was unprecedented in the history of French-US relations.

U.S. Trade Representative Robert Lighthizer expressed concern that the tax, expected to be passed by the French Senate Thursday, "unfairly targets American companies".

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"We will redouble our efforts for a consensus-based solution with a final report by 2020", they said in a statement. It will be paid by all global multinationals - around 30 companies, mostly American - but also firms from China, Germany, Spain and Britain.

Technology industry lobby group ITI, which represents Apple, Amazon, Google and other tech companies, urged the United States not to resort to tariffs in the dispute.

Legislators call it a tax on Les Gafa - the acronym for Google, Amazon, Facebook and Apple - companies that France has accused of paying insufficient income tax.

The U.S. investigation got bipartisan support from the top members of the Senate Finance Committee.

It will only be applied on outgoing flights and not those flying into the country, Borne added.

The inquiry, to be conducted by the United States trade representative, comes after French Finance Minister Bruno Le Maire proposed a 3% tax on certain revenue that large tech companies earn providing digital services to users in France.

Lighthizer said the United States "will continue its efforts with other countries at the OECD to reach a multilateral agreement to address the challenges to the worldwide tax system posed by an increasingly digitized global economy".

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