France Plans to Tax Tech Firms In Spite of U.S. Trade Threat

France won’t back off from its planned tax on tech companies even after the U.S. suggested it may use trade tools against the levy, according to Bloomberg.

The French Senate passed a bill to impose a 3% tax on global tech companies with at least 750 million euros in worldwide revenue and digital sales totaling 25 million euros in France. The U.S. said that it will examine whether the tax would hurt its tech firms, using the so-called 301 investigation, the same tool President Donald Trump deployed to impose tariffs on Chinese goods because of the country’s alleged theft of intellectual property.

France said the digital tax is in keeping with international rules, and that it won’t accept the use of trade tools to try to thwart it. “I deeply believe that between allies we can and must resolve our differences in ways other than with threats,“ Finance Minister Bruno Le Maire said in a speech in the Senate. “France is a sovereign state that decides its tax measures with sovereignty and will continue to take sovereign tax decisions.“

With the passage of the bill, France will become the first country in the European Union to impose such a levy, with other nations, including the U.K. and Germany, mulling similar taxes. A broad, EU-wide digital tax failed to garner a consensus in the 28-nation bloc this year, with France among the biggest advocates of a region-wide tax on tech companies’ revenue from digital advertising, user data sales and the like.

The British government is proposing a 2% tax on “the revenues of search engines, social media platforms and online marketplaces which derive value from U.K. users“ to come in to force from April 2020, according to its draft finance bill. The French law, which goes into effect retroactively as Jan. 1, 2019, targets about 30 companies around the world. While most of them would be American, the list would also include Chinese, German, U.K. and even French firms.

President Emmanuel Macron has two weeks to sign off or seek changes to the law. French presidents rarely modify laws once they are passed by parliament. It has only happened three times in the last 40 years. Le Maire said he spoke to U.S. Treasury secretary Steven Mnuchin, and noted that it’s the first time in the history of relations between the two countries that Washington has opened a 301 investigation against France.