US President Donald Trump has announced plans to take 'substantial reciprocal action' against France following the news that the country would impose a three percent tax on large technology companies, the majority of which are based in the US.
French President Emmanuel Macron announced plans to introduce a tax on digital services, set at three percent and applying to companies earning more than around £670 million in global revenue, earlier this month. Mimicked by the UK's Digital Services Tax legislation, currently in draft, the new tax is designed to close loopholes whereby companies shuffle profits outside a nation to putative 'headquarters' in tax-light countries. While it names no companies directly, those who are likely to be affected include Microsoft, Amazon, Facebook, and Google - all major US companies which have been accused of failing to pay their fair share in the past.
US President Donald Trump claims that should France progress with the planned tax, the US will react in kind. 'France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA,' Trump wrote on his personal Twitter account late on Friday. 'We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!'
Speaking to press following the Twitter post, Trump clarified that his plan was to introduce higher tariffs on products exported to the US from France - 'it might be on wine,' he claimed, 'it might be on something else.'
Oddly, Trump has not offered the same threat against the UK, whose own planned digital services tax is only marginally lower at two percent rather than France's three percent while the barrier for how large a company must be before it applies is lower at £500 million in global revenue of which £25 million must be generated from UK customers. The UK's tax is expected to go into force in the 2020 budget, and has been projected to add £275 million in tax revenue in the first year rising to £440 million per annum by 2023 for an estimated £8 million administrative cost.
In a statement to press, French Finance Minister Bruno Le Maire said that tariffs on physical goods and the digital tax are separate issues and that 'it is in all our interest to move towards a just taxation worldwide for digital companies.'
September 16 2019 | 14:00