France Passes Controversial Tech Tax, Setting Up Possible U.S. Retaliation
France's controversial tech tax is now law.
The so-called "GAFA tax" – because it targets companies including Google, Apple, Facebook and Amazon – will impose a 3 percent levy on tech giants with at least $845 million (750 million euros) in global revenue with sales totaling $28 (25 million euros) in France.
The law applies to digital platforms that connect users in transactions – like Airbnb and Uber – and digital advertising services that collect data, such as Google and Facebook. For Apple – another big target of the law – it will affect sales in the app store but not hardware sales, such as iPhone purchases.
GAFA targets international companies that "create value through French internet users," which often bypass taxes by opening regional offices but keeping their headquarters in countries with more lenient laws.
The law will apply to about 30 global companies and is expected to bring in $450 million (400 million euros) in revenue in 2019.
The passage of the bill comes after the U.S. preemptively announced it will open an investigation against the new law and explore new tariffs on French goods in retaliation.
"The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce," said U.S. trade representative Robert Lighhizer. The investigation will operate under Section 301, which the U.S. recently used against China.
"France is a sovereign state that decides its tax measures with sovereignty and will continue to take sovereign tax decisions," countered French finance minister Bruno Le Maire in a speech to the country's Senate.
Industry lobbying group Information Technology Industry Council (ITI), which counts Apple, Amazon and Google as members, said it is opposed to imposing tariffs. "We support the U.S. government's approach to investigating these complex trade issues, but call on it to use Section 301 in a spirit of international cooperation and without recourse to tariffs as a remedy," the group said in a statement.
France has said it would rescind the law if the international tech giants came under an international law. France is the first country to pass such a law, after the European Union failed to reach consensus on a similar tax last year. The G20 has discussed a similar law, and France has asked the U.S. to work with OECD on a international agreement. France is expected to bring up the issue again at the upcoming G7 meeting near Paris on July 17.
This article was originally published by The Hollywood Reporter.