U.S. to hold hearing on French tax investigation Aug. 19

French digital service tax target US companies unfairly says administration

The final vote in favor of the tax in the French Senate came hours after the Trump administration announced an investigation into the tax under the provision used a year ago to probe China's technology policies, which led to tariffs on $250 billion worth of Chinese imports.

France is hoping for either one of two outcomes- that countries will either implement their own, independent taxes; or that this move gives momentum to calls for a multilateral agreement of how digital firms should be taxed globally. "France is unlikely to be alone", Yueh said.

Dubbed the Gafa tax - an acronym for Google, Apple, Facebook and Amazon - the legislation will target companies with at least €750m (£675m) in annual revenues and apply to revenue from digital business, such as online advertising. Ireland, Luxembourg and other small European Union members have been active in thwarting efforts to impose an EU-wide digital tax, hastening go-it-alone efforts by France, Britain and others.

On Thursday, the French Senate approved the 3% levy that will apply to revenue from digital services earned in France by firms with more than 25 million euros in French revenue and 750 million euros worldwide. France forecasts that the tax could bring in as much as €500m a year.

Nevertheless, those most likely to be hit by the measure are largely American giants, and the Trump administration in Washington is determined to defend its online operators. This is a tax charge for the largest digital businesses - search engines, social media platforms and online marketplaces - with global revenues over £500m and United Kingdom revenues over £25m to reflect the revenue derived from their United Kingdom users. These limits have been set to apply to companies with worldwide revenue in excess of £500 million of which in excess of £25 million is derived from United Kingdom customers. France's finance ministry aims to raise up to 500 million euros ($562 million) annually from the measure by 2020.

But the lawmakers noted that France is a sovereign state which can not be dictated to how to operate and how to handle businesses taking part within its territories.

"Between allies, we can, and we should, solve our differences without using threats", Bruno Le Maire said just ahead of the final vote in the French Senate.

In a statement on Wednesday, the office of the US Trade Representative said the tax suggests unfair treatment of US-based tech companies. "France is a sovereign nation".

'The UK has always sought to lead in finding an global solution to taxing the digital economy, ' claims Financial Secretary to the Treasury and Paymaster General Jesse Norman.

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