Trump orders investigation into french digital tax

On August 6, 2019, the Trump administration announced that it would be launching an investigation into France's digital services tax, which was introduced in July 2019. The tax, also known as the "GAFA" tax (named after the French acronym for Google, Amazon, Facebook, and Apple), imposes a 3% tax on the revenue of digital companies with more than €750 million in global revenue and €25 million in French revenue.

The investigation was launched in response to a complaint filed by the U.S. Trade Representative (USTR) with the World Trade Organization (WTO). The USTR argued that the French tax is discriminatory and unfair, as it targets U.S. companies such as Google, Amazon, Facebook, and Apple, while exempting French companies.

The investigation is being conducted under Section 301 of the Trade Act of 1974, which allows the USTR to investigate foreign trade practices that are deemed to be unfair or discriminatory. The investigation is expected to take several months to complete, and if the USTR finds that the French tax is indeed unfair, it could impose retaliatory tariffs on French goods or services.

The French government has defended its tax, arguing that it is necessary to address the issue of digital companies not paying their fair share of taxes in France. The tax is expected to raise around €500 million in revenue for the French government in 2020.

The investigation has sparked concerns about the potential impact on the global digital economy and the risk of a trade war between the U.S. and France. The European Union has also expressed concerns about the U.S. investigation, arguing that it could undermine the EU's efforts to establish a global framework for taxing digital companies.

In response to the U.S. investigation, the French government has announced that it will not repeal the digital services tax, but will instead work with other EU countries to establish a common approach to taxing digital companies. The EU has also launched its own investigation into the U.S. tax system, arguing that it is unfair and discriminatory towards European companies.

The dispute highlights the challenges of taxing digital companies, which often have complex global operations and can avoid paying taxes in individual countries. The issue is likely to remain a contentious one in the coming years, as governments around the world seek to find ways to tax digital companies and ensure that they contribute their fair share to the public purse.