- France occupies a prominent place among the largest exporters of wine to the US market.
- The French government said multinationals such as Apple, which has offices outside their own countries, pay few taxes and may not pay taxes on their sales in France.
- The digital service tax imposed by France is expected to pay about 30 companies, most of them are US companies.
US President Donald Trump accused his French counterpart Emmanuel Macron over the digital service tax, hinting that he would impose a tax on French wine in the United States in return. Trump expressed displeasure from his Twitter account Friday over French plans to tax multinational technology companies such as Google. The French authorities have justified this tax because such companies pay little or no taxes at all in the countries where they operate.
The US administration said the French decision is unfairly targeting American technology giants. “France imposed a digital service tax on our great technology companies, and I see if France has to impose taxes, let it impose on French companies,” the president said in a tweet on Twitter. We will announce a procedure to respond to Macron’s crap quickly, and I always say that American wine is better than French,” he said.
Asked about the problem later in the Oval Office, Trump, who does not drink alcohol, said: “I’ve always loved American wine more than French wine. Even though I do not drink wine, I just like the way it looks.” The United States is at the top of the list of wine consuming countries in the world and the largest market for import, and France occupies a prominent place among the largest exporters of wine to the US market.
French Finance Minister Bruno Le Marie responded to Trump’s remarks, asserting that France was sticking to its plans to tax digital services. “The international tax on digital operations is a challenge that will affect us all,” said Le Marie. The International Monetary Fund (IMF) has warned of the risk that the giant technology companies will dominate the global financial system. France imposed a tax on Google and Facebook despite Washington’s threats.
The French government said multinationals such as Apple, which has offices outside their own countries, pay few taxes and may not pay taxes on their sales in France. Indeed, the French Senate approved the digital sales tax law last Thursday, a week after it was passed by the House of Representatives (National Assembly).
The new French digital tax is a tax targeting any technology company with revenues exceeding 750 million euros a year – including at least 25 million that the company has achieved in France – a retroactive tax since the beginning of 2019, which is expected to bring tax revenue to the French government at 400 million EUR this year.
Currently, large internet-based companies are paying very low corporate tax in countries where there is no physical presence (major headquarters for their businesses) while announcing profits in the countries where they are located. The European Commission estimates that the tax on profits of conventional companies in the European Union is 23 percent, asserting that Internet companies pay taxes not exceeding 8 or 9 percent of profits in the region.
France has long called for taxes to be imposed on digital activity rather than the physical presence of the company, or its branches in the country. France was also the first European country to announce its own plan to tax the profits of digital service providers in its territory in late 2018 after European efforts to agree to impose such taxes across the EU were stalled.
Such a tax in the European Union requires consensus among members of this political and economic bloc, but Ireland, the Czech Republic, and Finland have objected to the digital service tax. France is set to impose a tax on technology company sales of 3.00 percent in France, other than tax on their profits.
“France exercised its sovereignty and imposed its own tax rules,” the French finance minister said in defending the kind of cartoons. “I want to tell our American friends that they should see this as an incentive for them to accelerate the pace of work towards an agreement that includes an international tax on digital services,” he said.
The digital service tax imposed by France is expected to pay about 30 companies, most of them are US companies such as Alphabet, Google, Facebook, Amazon, and Microsoft. The French decision will be influenced by Chinese, German, Spanish and British companies.
The French government said the tax would be canceled if a similar procedure was agreed at the international level as a substitute. Prior to President Trump’s tweet, US Trade Representative Robert Laitheiser announced the opening of an investigation into the French tax, citing his decision that France ” targets technology companies based in the United States unfairly.”