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US threatens tariffs on £1.9bn of French goods as tech tax row intensifies

The Trump administration is threatening to impose 100 per cent tariffs on $2.4bn (£1.85bn) of French imports as the row over President Emmanuel Macron’s tech tax intensifies.

The US federal tax office has described the fiscal regime, which taxes tech companies’ revenues rather than their profits, as “inconsistent with prevailing principles of international tax policy” and “unusually burdensome for affected US companies”.

Plans for a new global model for taxing tech companies are being drawn up by the OECD, but a number of governments have grown frustrated with the organisation’s slow progress to date and have decided to act unilaterally.

The US’s intervention lends weight to fears that the Trump administration will force the UK to drop its own plans for a digital services tax if it wants a trade deal after Brexit. Austria, Italy and Turkey have all taken steps to introduce similar legislation to Macron’s and are now also likely to find themselves in the cross-hairs of US investigators.

Robert Lighthizer, the US trade representative, said in a statement reported by Reuters: “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies.”

As NS Tech reported at the time, the UK government announced in July that it was pressing ahead with plans to introduce a new two per cent tax on tech companies’ revenues despite the threat of US retaliation. Both Labour and the Conservatives’ manifestos include plans to roll out a digital services tax. Labour has proposed taking a cut of global profits as well as domestic revenue.

The Treasury said earlier this year the tax would be derived from “the revenues of search engines, social media platforms and online marketplaces which derive value from UK users”, indicating it would hit Google, Facebook, Twitter and Amazon.