US launches investigation into France’s technology tax

Donald Trump has ordered an investigation into France’s proposed tax on technology companies, a step that could lead to the United States imposing new tariffs or other trade restrictions.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” U.S. Trade Representative Robert Lighthizer said in a statement.

Lighthizer has up to a year to investigate if France’s digital-tax plan would hurt U.S. technology companies and the investigation will determine if the levy poses an unfair trade practice.

Prior investigations have covered Chinese trade practices and European Union subsidies.

A 3% tax on the French revenue of large internet companies could yield 500 million euros ($563 million) a year for the French exchequer.

USTR said in a statement the “services covered are ones where U.S. firms are global leaders. The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain U.S.-based technology companies.”

Lighthizer said Trump “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.”

The French tax will target some 30 companies, mostly American but also Chinese, German, Spanish and British, as well as one French firm and several firms with French origins that have been bought by foreign companies.

The tax would affect companies with at least 750 million euros ($844 million) in annual revenues and apply to revenue from digital business including online advertising.

Companies such as Alphabet Inc’s (GOOGL.O) Google, Apple Inc (AAPL.O), Facebook Inc (FB.O) and Inc (AMZN.O) would likely be subject to the tax.

Technology industry lobby group ITI, which represents Apple, Amazon, Google and other tech companies, urged the United States not to resort to tariffs in the dispute.