France’s Finance Minister Bruno Le Maire sought to reassure the U.S. its proposed digital tax is just a temporary fix as the country’s lawmakers began debate on the bill.
“It is unacceptable that this tax situation leads to the emergence of digital giants that buy, one by one, all our startups and kill innovation in our country,” Le Maire said April 8 as the National Assembly began considering a bill that would impose a 3 percent digital tax.
The bill would tax revenue large companies earn from certain digital activities, like targeted online advertising and “intermediary” platforms that connect buyers and sellers online.
The proposal has sparked U.S. complaints that it unfairly targets mostly U.S. tech giants like Alphabet Inc.'s Google and Facebook Inc. Secretary of State Mike Pompeo has urged France not to move forward with the tax. The U.S. Trade Representative’s Office included digital tax measures like France’s on a list of “key barriers to digital trade” in 2019.
“We are working with our American partners to find the best solution. With the American Secretary of Treasury, Steven Mnuchin, we are determined to push progress of this international solution. My commitment is clear: the day when there is a digital tax at the international level, France will withdraw its national tax,” Le Maire said.
The Treasury Department didn’t return a request for comment.
But French officials warned that France is a sovereign country that makes its own tax policy.
Although France favors multilateral action, “multilateralism should not mean powerlessness. If it is necessary to clear the way, France will take the lead,” Le Maire said.
Trade War Doubts
A lawmaker involved in drafting the bill dismissed concerns that the proposal could lead to a trade war with the U.S.
“Our response is two-fold. First, France is a sovereign country that conducts its own tax policy. Second, I don’t see how a trade war could be started by a tax that raises 400 million euros,” assembly member Joel Giraud told the National Assembly.
Giraud compared the proposal to recent European Commission fines on companies like Google that totaled billions of euros. “That didn’t trigger the apocalypse,” he said.
The European Union’s Competition Commissioner Margrethe Vestager, meanwhile, praised France for taking action.
“The best thing is a global solution, but if we want solutions in a reasonable time, then Europe must step forward,” Vestager said on France Inter, a radio channel part of Radio France.
“France is showing the way. I think it’s important that all European states that want to do something do it. And the best way is to harmonize at the European level and then go to OECD,” she said.
—With assistance from Gregory Viscusi (Bloomberg)