France, US in spat over future 'Gafa' tax on top tech firms

The French finance ministry has slammed a US call for an inquiry into France's "Gafa" Bill, which passed into law Thursday. The Law will impose a full rate of tax on leading tech firms Google, Apple, Facebook and Amazon. The treasury in Paris is outraged at the US hinting at hiking tax on French goods as a retaliatory measure.

The logos of the four main 'Gafa' firms, whose names form the acronym beloved of French experts behind legislation to tax their revenues generated in France as of 2019 Reuters stock

The French Bill to tax the Gafa firms – Google, Apple, Facebook and Amazon, all of them US-based does not contravene any international agreements, says the French economy and finance ministry.

According to the ministry, it would therefore be unjustifiable for Washington to take trade reprisals against France.

"Countries have sovereign rights over their fiscality. So we believe that using retaliatory trade measures to attack another state's sovereignty is not appropriate," said a ministry source.

French Economy and Finance minister Bruno Le Maire at a press conference talking about his Gafa tax plan on 6 March 2019, ahead of a cabinet meeting in Paris ERIC PIERMONT / AFP

Potential strike back

On Wednesday, US president Donald Trump commissioned his adminstration to carry out an inquiry into the French Gafa Tax Bill and depending on their conclusions, could lead to customs hikes on French goods, or other trade reprisals.

The US Trade Representative, Robert Lighthizer said, "The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies."

Lighthizer has one year to assess the potential of France's digital-tax law to harm US technology companies.

Both Republicans and Democrats have hailed Trump's call for an inquiry. Two members of the Senate Finance Committee said it is, "clearly protectionist ... and will cost US jobs and harm American workers."

The nitty-gritty

The Gafa Bill was in the right-wing majority Senate as expected and now becomes law.

In brief, the new tax will apply to digital firms which derive value from French web surfers. The tax would be levied from the Gafa-four but would stretch to include about 30 firms, including Airbnb, Meetic or Instagram.

The French government hope to raise 400 million euros from taxing firms who earn more than 750 million euros worldwide and more than 25 million euros out of France by levying three percent of that amount retroactively from 1st January 2019.

Pioneering France

French finance minister Bruno Le Maire has said that France would abolish the tax when digital firms are subjected to an international tax.

France meanwhile is taking the lead. In June in Japan, the G20 countries' finance ministers agreed in principle on a similar law to tax the so-called Gafa firms.

The European Union had mooted the idea first, but was blocked by Ireland, Sweden, Denmark and Finland, from pursuing.