US trade representative Robert Lighthizer. Picture: REUTERS
US trade representative Robert Lighthizer. Picture: REUTERS

Washington — US President Donald Trump, on Wednesday, ordered an investigation into France’s planned tax on technology companies, a probe that could lead to the US imposing new tariffs or other trade restrictions.

“The US is very concerned that the digital services tax, which is expected to pass the French senate [on Thursday] unfairly targets American companies,” US trade representative (USTR) Robert Lighthizer said in a statement announcing the investigation.

The move gives Lighthizer up to a year to investigate if France’s digital-tax plan would hurt US technology companies. The section 301 investigation will determine if the levy poses an unfair trade practice. Prior investigations have covered Chinese trade practices and EU subsidies on large commercial aircraft.

French finance minister Bruno Le Maire said in March that a 3% tax on the French revenue of large internet companies could yield €500m a year.

The USTR said in a statement, “The services covered are ones where US firms are global leaders. The structure of the proposed new tax, as well as statements by officials, suggest that France is unfairly targeting the tax at certain US-based technology companies.”

Lighthizer said Trump “has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts US commerce.”

Le Maire said the tax would target some 30 companies, mostly American but also Chinese, German, Spanish and British, as well as one French firm and several firms with French origins that have been bought by foreign companies.

The tax would affect companies with at least €750m in annual revenues and apply to revenue from digital business including online advertising. Companies such as Alphabet’s Google, Apple, Facebook and Amazon would likely be subject to the tax.

Tech industry lobby group ITI, which represents Apple, Amazon, Google and other tech companies, urged the US not to resort to tariffs in the dispute. “We support the US government’s efforts to investigate these complex trade issues but urge it to pursue the 301 investigation in a spirit of international co-operation and without using tariffs as a remedy,” Jennifer McCloskey, ITI’s vice-president of policy, said in a statement.

Senate finance committee chair Chuck Grassley, a Republican, and Senator Ron Wyden, the top Democrat on the panel, praised the investigation.

“The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers,” they said in a joint statement.

“The US would not need to pursue this path if other countries would abandon these unilateral actions and focus their energies on the multilateral process that is underway.” 

Lighthizer said the US “will continue its efforts with other countries at the Organisation for Economic Co-operation and Development (OECD) to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitised global economy.”