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US threatens tax on champagne and French cheese

December 4, 2019

 

 

The Trump administration is threatening to slap import taxes on $2.4bn worth of French goods, including cheese, champagne, make-up and handbags.

 

The planned tariffs come in response to a new French digital services tax that would affect companies including Google, Amazon and Facebook.

France, along with several other European countries, wants to limit the tech giants' ability to avoid taxes.

 

But trade officials in Washington say US firms are being unfairly targeted.

French minister Bruno Le Maire called the US threat to impose tariffs in response to the tax "unacceptable" and suggested France would be prepared to retaliate.

 

Why has France introduced the new tax?


France has long been concerned that US technology giants are avoiding taxes in the European Union. France says taxes should be based on where the digital activity - browsing the page - takes place, not where firms have their headquarters.

 

It is not the only country to raise concerns and a group of nations are drawing up new multilateral rules via the OECD. But France does not want to wait for that to bear fruit, so this summer drew up its own tax.

 

It is imposing a 3% tax on any digital company with revenue of more than €750m ($850m; £670m), of which at least €25m is generated in France. The tax will be back-dated to early 2019, and is expected to raise about €400m this year.

 

About 30 companies are expected to pay it, mostly US firms such as Alphabet, Apple, Facebook, Amazon and Microsoft. Amazon has already responded by raising fees for French businesses by 3%.

 

What is Washington threatening?


Robert Lighthizer, the US Trade Representative (USTR), has published a list of French products that could face tariffs, including champagne and sparkling wine, Roquefort and other cheeses, make-up, handbags, and homeware such as porcelain and bone china.

 

Some of the tariffs are as high as 100% of the import price, and are likely to push up the price of these products for US consumers.

 

However, before the tariffs are confirmed, there will now be what the US calls a period for public comment, including a hearing in Washington in January.

 

Why does the US want to impose the tariffs?


The US says the French tax unfairly targets some US multinationals. Mr Lighthizer said the threat of tariffs was intended to deter other countries from taking similar steps.

 

The trade official said the move "sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies".

Mr Lighthizer warned that the US intended to look into digital taxes introduced by Austria, Italy and Turkey.

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