In response to US President Donald Trump's threat to impose tax on French wine in retaliation to France's digital tax, the French government has clarified that it would not be retracting from its decision to tax technology giants, which primarily include US companies such as Alphabet-owned Google, Facebook, Apple, Amazon and Microsoft.
"Universal taxation of digital activities is a challenge for us all. We want to reach an agreement within the G7 and the OECD. In the meantime, France will implement its national decisions," Economy Minister Bruno Le Maire said in response to Trump's warning.
On Friday, Trump had threatened "substantial" retaliation over Paris targeting top US tech companies. "I told him (French President Emmanuel Macron) don't do it, because if you do it, I'm going to tax your wine—tariff or tax—call it whatever you want. So, yeah, we are working on that right now," Trump told reporters at the White House.
Responding to a question, Trump said he "might" impose tax on French wine. "So, France put a tax on our companies. You know that. Wrong thing to do. They should not have done it. So I may do that," he said.
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What's digital tax?
On July 11, France passed a legislation to impose ‘digital tax’ of three per cent on sales generated domestically by multinational technology firms. Any digital company with revenue of more than €750 million—of which at least €25 million is generated in France—would be subject to the levy. It is to be noted that the tax will be levied on the sales, rather than on profits.
The tax will be retroactively applied from early 2019, and is expected to raise about €400m this year.
According to a BBC report, more than 30 companies will be taxed under the new law. Apart from the US giants such as Alphabet, Apple, Facebook, Amazon and Microsoft, Chinese, German, Spanish and British firms, as well as the French online advertising company Criteo would also be affected.
