USA launches investigation into France's tax on tech giants

Expect a lot of legal challenges said Giuseppe de Martino president of the French tech industry group ASIC. Stock image

Expect a lot of legal challenges said Giuseppe de Martino president of the French tech industry group ASIC. Stock image

Lighthizer said the U.S. president had directed the investigation find out whether the tax is "discriminatory or unreasonable and burdens or restricts United States commerce".

The tax set to affect 30 companies headquartered in U.S. is expected to be signed into law by President Emanuel Macron, to whom taxing has been a priority, soon.

Trump's call for an investigation marks a change in tone for the president, who has spent weeks accusing America's biggest tech firms of bias against conservatives bias and hinting at antitrust grievances.

The law will levy a 3.0 percent tax on revenues generated from services to French consumers by the largest tech firms. Taxing revenue is meant to counter the complex arrangements most United States tech firms have in place to avoid paying high taxes on their profits.

The Group of 20 has tasked the Organization for Economic Cooperation and Development with finding a fix in the worldwide tax system that has allowed some internet heavyweights to take advantage of low-tax jurisdictions in places like Ireland and pay next to nothing in other countries where they make huge profits.

Amazon's European base is Luxembourg, another low-tax jurisdiction.

Le Maire said: "I want to highlight that this is the first time in the history of relations between the USA and France that the American administration has made a decision to open a Section 301 procedure".

"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.

France has previously tried to spearhead a digital tax at the European Union level but hit some roadblocks with a few reluctant member states that offer attractive deals.

This investigation could result in USA tariffs on French goods, increasing transatlantic trade tensions. He has even threatened to sue firms like Google and Facebook.

The issue now risks overshadowing a meeting of G7 finance minister outside Paris next week which is supposed to prepare the summit of leaders hosted by President Emmanuel Macron in August.

"Countries are sovereign on tax matters".

Asked whether the UK government was concerned about a Section 301 investigation, a spokesperson for the UK Revenue and Customs department declined to comment on "what another country's government might do". The French tax is expected to be enacted within 21 days and will be applied retroactively from January 2019. "CCIA encourages France to lead the effort toward more ambitious global tax reform, instead of the discriminatory national tax measures that harm global trade".