France faces U.S. backlash on 3% digital services tax

French digital service tax target US companies unfairly says administration

Some experts said the costs of compliance could add up for tech firms, especially if more European Union countries push through their own national taxes.

"Countries are sovereign on tax matters". Johnson has backed new taxes on tech companies.

Google, Amazon, Facebook and Apple - or GAFA, as the French call the group of American tech giants - are among the companies France will slap with a tax bill. But US officials saw the measures is unfair for American firms. The Organization for Economic Cooperation and Development (OECD) is now reviewing steps to modernize the tax system for the digital economy but has said it won't reach a conclusion until 2020. In October 2018 the United Kingdom government's 2018 Budget included a proposed "Digital Services Tax" which would be 'a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models' - primarily as a means of closing a loophole which has seen companies like Google dodge billions in tax.

The decision to press forward with the plans arrives despite the hostility France has received from the USA after it recently announced similar digital tax plans.

Earlier this year, the European Commission outlined proposals for a 3pc tax on revenues of large internet companies with global revenues above €750m per year, but this move was met with the same criticism that met France's decision from those who believe that this type of tax breaches worldwide rules on equal treatment for companies around the world. There was general agreement from most states except for Ireland, Sweden and Denmark who opposed the tax.

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

Le Maire said he was warned about the investigation during a "long conversation" with US Treasury Secretary Steven Mnuchin on Wednesday, saying it was the first time such a step had been taken in the history of French-US relations.

"Between allies, we can and should solve our disputes not by threats but through other ways", Finance Minister Bruno Le Maire told senators before the final vote.

In Silicon Valley, US tech companies have responded as angrily as the US government, claiming that it could lead to double taxation.

It will also not target tech companies that stream, broadcast or publish media like film or music, meaning Netflix, Spotify and Amazon Prime Video can rest assured that their businesses will be exempt from the tax. "If we're going to pay more tax in Europe, that's fine, but then we should get a reduction in our U.S. tax bills".

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