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July 18, 2019

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US objects to French tax on tech firms at G7

The Trump administration is objecting to France’s plan to tax Facebook, Google and other US tech giants, a rift that’s overshadowing talks between seven longtime allies near Paris this week on issues ranging from digital currencies to trade.

As finance officials from the Group of Seven rich democracies’ gathered yesterday at a chateau in Chantilly, near Paris, the United States’ Treasury Secretary Steven Mnuchin planned to take a tough line against host France.

He was going to object against France’s proposed 3 percent tax on revenues of large tech companies with the G7 host, French Finance Minister Bruno Le Maire, according to a senior Treasury official.

The controversial tax, which the French parliament passed days ago and could be signed into law within weeks, has already provoked a strong rebuke from the White House, which said it could lead to US tariffs on French imports.

International agreement

The rift risks feeding into broader disagreements, including on trade, after the US imposed tariffs on some EU goods last year, drawing retaliation from Europe.

“We are very disappointed that France has passed a unilateral service tax,” said the Treasury official, who said Mnuchin was set to raise the issue during yesterday’s bilateral meeting with Le Maire.

French officials have indicated the digital tax is intended to spur an international agreement during the G7 meeting and pledged it will be withdrawn if a deal is forged. This strategy is expected to give the hosts some negotiating leverage with the US.

“We (are) ... accepting to negotiate a new global taxation on digital activities,” Le Maire told reporters outside the royal stables at Chantilly, a town famed today for horse racing.

Discord is no stranger to G7 meetings. Last June, Trump roiled the G7 summit in Canada by first agreeing to a group statement on trade only to withdraw from it while complaining that he had been blindsided by Canadian Prime Minister Justin Trudeau’s criticism of US President Donald Trump’s tariff threats. In an extraordinary set of tweets, Trump threw the G7 talks into disarray.

The regulation of technology companies is emerging as a major issue for countries. The US is following the European Union’s lead in taking a closer look at whether some of them are too big for the good of the wider economy. The issue was underscored yesterday, when EU regulators in Brussels opened a formal antitrust investigation into Amazon, echoing similar ones against the likes of Google and Microsoft.

Le Maire is joining his counterparts from Germany, Britain, Italy, Canada, Japan and the US for the meeting in Chantilly. Hanging over the ministers when they sit down for day one’s working dinner: Slowing global growth and the America-first trade policies of Trump, which have led to a tariff war with China on top of the tensions with Europe.

Where the US may find more common ground with its G7 partners will be in its mistrust of cryptocurrencies like Facebook’s recently announced Libra, a position shared by the French.

Le Maire hopes to lead on this issue, singling out Facebook’s Libra currency for scrutiny at the meeting that will prepare the framework for a summit of the G7 heads of state and government, scheduled from August 24 to 26 in the French Basque Country resort of Biarritz.

“The red line for us is that Libra cannot and should not transform itself into sovereign currency,” Le Maire warned.




 

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