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20th Jul 2019

EU hesitates to back France over US tariff threat

  • Tech giant Apple may end up having to pay the French tax (Photo: Jon Rawlinson)

The European Commission says it will coordinate closely with French authorities on the next steps, following a threat by the United States to slap new tariffs on the country.

The French parliament on Thursday (11 July) passed a new law to introduce a three percent tax on digital tech giants, which would raise some €500m revenue each year.

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Tech firms and other industry giants that have at least €750m in annual revenue will be hit. Among them are US global powerhouses like Apple, Facebook, Amazon.com and Alphabet Google.

US president Donald Trump earlier this week ordered a so-called section 301 investigation into the French tax to determine if it constitutes an unfair trade practice.

The probe could lead to the US imposing extra tariffs or other trade restrictions.

The Commission, for its part, says it will "watch this [US] investigation very closely", while also noting that it prefers EU states to use its common digital services tax whenever they introduce national measures.

"This will help to minimise the fragmentation of the single market and ensure compatibility with EU law," a European Commission spokesperson said, in an email on Thursday.

"As a general matter, we are concerned about the use of unilateral approaches [such as the Trump threat], which are at odds with a rules-based multilateral trading system," said the spokesperson, referring to the US announcement.

British Green MEP Molly Scott Cato said the latest US threat from Trump also served as a timely reminder for the UK, which is planning a similar tax on tech giants.

"Working collaboratively, the EU can and must stand up to the aggressive tactics of Trump's America," she said in a statement.

She added "Brexit would leave the UK isolated, unable and unwilling to confront the US and corporate might."

The latest Trump outburst follows a US pattern of tit-for-tat on trade issues and other disputes with the European Union.

Before the vote, French finance minister Bruno Le Maire said the tax would also affect firms from China, Germany, Spain and the United Kingdom.

"France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign," he said, in reaction to the US investigation.

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