TL;DR: During a recent radio interview, and later in a formal letter, French economic minister Bruno Le Maire warned Trump administration officials about threats to retaliate against the French Digital Services Tax (DST). Last summer, the government’s DST revealed a 3% tax on digital businesses earning more than 25 million euros in the country, 750 million euros globally, impacting US-based giants such as Facebook, Amazon, Apple, and Google.
Retaliation to French Digital Services Tax: Le Maire Warns US Administration
In a letter to US Trade Representative Robert Lighthizer, Le Maire warned, “If the U.S were to decide to impose trade sanctions against the EU over the French Digital Services Tax, it would deeply and durably affect the transatlantic relationship at a time when we need to stand united,” according to Reuters UK. Le Maire also insisted the European Commission and its member states were in consultation over the matter, “contemplating the various options to defend our trade rights in a proportionate and determined manner, as we have in the past.”
Earlier last month, Lighthizer issued the Report on France’s Digital Services Tax Prepared in the Investigation under Section 301 of the Trade Act of 1974, a 93-page skewering of the DST the French government’s motives and legalities under international law and agreements. It concluded the French DST “is intended to, and by its structure and operation does, discriminate against U.S. digital companies,” and that its “retroactive application is unusual and inconsistent with prevailing tax principles and renders the tax particularly burdensome for covered U.S. companies,” among other supposed fundamental problems.
This was after the Trump administration responded to the DST’s initial summer rollout by threatening to impose tariffs up to 100% on French staples such as champagne, handbags, and other assorted products from the country totaling some $2.4 billion worth of products. Most analysts viewed the DST as a direct levy against American companies such as Facebook, Amazon, Google, and Apple.
“If the Americans decide to go ahead and impose sanctions against the digital tax … in this case we would retaliate,” Le Maire explained to France Inter radio. “If there were to be sanctions, and it is a possibility that we will take sanctions, we would immediately contact the WTO (World Trade Organization).” For Le Maire and the Macron administration, it was a long 2019 domestically, as protests and strikes throughout France by workers at various levels over pension concerns and conditions made world headlines. A tax on foreign behemoths, and especially those from the US, was and is thought to be at least politically popular with the French street, providing the government some small cover over charges it is unresponsive to protesters.
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