Economy

France to impose green tax on plane tickets

France to impose green tax on plane tickets

The US will investigate whether France's digital services tax, expected to pass the Senate tomorrow, unfairly targets US companies, US Trade Representative Robert E. Lighthizer today announced.

The investigation could spark other countries to tax tech giants following belief the U.S. companies aren't paying enough tax worldwide. Large tech companies, under the proposal, are those with digital revenue of more than €750 million ($845 million) worldwide and more than €25 million ($28 million) in France.

The so-called Section 301 investigation is the primary tool the Trump administration has used in the trade war with China to justify tariffs against what the United States says are unfair trade practices. The probe was launched under Section 301 of the US Trade Act of 1974.

Despite a warning by the Trump administration, France has chose to move ahead on a new technology tax initiative.

However, that is unlikely as the bill found wide backing among senators even though some voiced concern about double taxation as corporation tax is based on profit and the digital tax is based on revenues.

"France's move to enact a unilateral, national digital tax opens the door to a fragmented, inefficient global tax system that would reduce business certainty and impede innovation, job creation, and economic growth worldwide", Ms Jennifer McCloskey, vice president of policy at ITI, a U.S. tech-industry association, said in a statement this week. It's for that reason that the United States government has ordered an inquiry into the new tax, with the potential to implement tariffs on French goods in retaliation.

"Between allies, I believe we can and must resolve our differences in another way than through threats", Economy Minister Bruno le Maire told the French Senate.

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But this compromise failed to be agreed, leaving France to press ahead with its own tax which it introduced on 1 January 2019.

"France is a sovereign country, its decisions on tax matters are sovereign and will continue to be sovereign", he added.

The proposed digital services tax may not be the only grounds for the beginning of a trade war between with USA and Europe, however.

Despite U.S. pressure, French officials stood firm on Thursday, brushing off the criticism.

Washington considers the planned French tax to be discriminatory against multi-national companies with headquarters in the USA.

"We are becoming an increasingly digital world and it will be a huge problem if we do not find a way to raise [digital] taxes", European Competition Commissioner Margrethe Vestager said in April.

While addressing the senate, France's finance minister said data is taxed 14 points lower than other economic activity and all they are doing is "restoring economic fairness".