President Donald Trump speaks during a full honors welcoming ceremony for Secretary of Defense Mark Esper at the Pentagon, Thursday, July 25, 2019, in Washington. (AP Photo/Alex Brandon)

Trump vows to retaliate against French digital tax

July 26, 2019 - 2:47 pm

WASHINGTON (AP) — President Donald Trump promised on Friday to retaliate against France for adopting a pioneering tax on internet giants like Google, Amazon and Facebook.

He also managed to get in a shot at French wine. Trump, who doesn't drink, tweeted: "I've always said American wine is better than French wine!"

The digital tax primarily targets companies that use consumer data to sell online advertising. The tax is designed to stop multinationals from avoiding taxes by setting up headquarters in low-tax EU countries. Currently, the companies pay nearly no tax in countries where they have significant sales.

Trump says that if anybody taxes American technology companies, it should be their home country. He adds, referring to French President Emmanuel Macron: "We will announce a substantial reciprocal action on Macron's foolishness shortly."

The French law does not specifically target U.S. companies. It targets any digital company with yearly global sales worth more than 750 million euros ($844 million) and French revenue exceeding 25 million euros. The revenue threshold is supposed to allow more room for smaller companies to enter the market.

However, the Trump administration emphasizes that the services covered under the tax are ones in which U.S. firms are global leaders. United States Trade Representative Robert Lighthizer initiated an investigation earlier this month to determine whether the tax is discriminatory or unreasonable and restricts U.S. commerce. Such a finding would allow Trump to levy retaliatory tariffs.

"The Trump Administration has consistently stated that it will not sit idly by and tolerate discrimination against U.S.-based firms," said White House spokesman Judd Deere.

The digital tax has also riled Republican and Democratic members of Congress. Leaders of the Senate Finance Committee have urged Treasury Secretary Steven Mnuchin to explore increasing taxes on French subsidiaries in the U.S.

France failed to persuade European Union partners to impose a Europe-wide tax on tech giants, but is now pushing for an international deal with the 34 countries of the Organization for Economic Cooperation and Development.