France will press ahead with a planned tax on big U.S. tech companies, despite warnings of retaliation from the White House, as the proposed levy threatens to open yet another area of trade and business tension between the U.S. and Europe.
France's Senate approved the plan Thursday after Finance Minister Bruno Le Marie argued the proposed 3% levy, which targets companies that earn at least €750 million in annual revenues from digital services, is within international taxation rules and should not be countered by trade measures from governments abroad.
"Between allies we can and should solve our disputes not by threats but through other ways," Le Maire told French lawmakers ahead of the final vote in Paris. "France is sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign."
The levy has opened a new rift between Washington and Paris, following ongoing disputes over subsidies for planemakers Airbus SE (EADSY) and Boeing Co. (BA - Get Report) and the potential targeting of European automakers with fresh import levies under the pretext of national security concerns.
President Donald Trump ordered an investigation of the digital tax, which is likely to fall most heavily on U.S. tech companies such as Facebook (FB - Get Report) , Amazon (AMZN - Get Report) , Alphabet (GOOGL - Get Report) and Apple (AAPL - Get Report) and is projected to raise around $560 million each year for the French Tresor.
"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies," U.S. Trade Representative Robert Lighthizer said in a statement late Wednesday. "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 Senate Finance Committee Chairman, Republican Chuck Grassley, as well as its ranking Democrat, Senator Ron Wyden of Oregon, called France's move "clearly protectionist" and said it "unfairly targeted" U.S. companies, a view echoed by Amazon
"We applaud the Trump Administration for taking decisive action against France and for signalling to all of America's trading partners that the U.S. government will not acquiesce to tax and trade policies that discriminate against U.S. businesses," Amazon said in a statement late Wednesday..
However, the ITI, a tech industry lobby, supported the USTR's investigation, but urged it not to use tariffs as a remedy.