The search engine giant is pushing for a new worldwide tax deal that doesn't discriminate against foreign firms. It will levy a 3% tax on income from digital services earned in France by companies that make more than 25 million euros ($28 million) in French revenue and 750 million euros ($844 million) in global revenue.
Amazon, Apple and Facebook are among the firms that would be affected. "It is the first time in the history of the relationship between the United States and France that the USA administration has chose to open [a Section 301 investigation]". "I deeply believe that, between allies, we can and must resolve our differences in ways other than with threats", French finance minister, Bruno Le Maire, said in the senate.
Soon after the French government unveiled the plan, Air France announced that it "strongly disapproves" of the tax, issuing a statement in which it said the initiative would cost its combined airlines more than $67 million each year.
The US trade representative Robert Lighthizer said in Washington that he had initiated on instructions from President Donald Trump, a study of what the impact of the digital tax on the US trade.
Despite resistance from member states, the digital tax plans could however return at European Union level.
Essentially, the concern is that the French tax is going to affect mostly American companies.
Flaying the French tax, Amazon called it "poorly constructed" and "discriminatory", adding that it does "significant harm to American and French consumers alike". "Countries are sovereign on tax matters".
Brussels' efforts stalled since an EU-wide levy has to be approved by all members, but Ireland, the Czech Republic, Sweden and Finland raised objections. The aim of this new policy is to correct the current the tax framework which does not take into account the value businesses derive from users when allocating profits between different countries.
The move gives Lighthizer up to a year to investigate if France's digital-tax plan would hurt USA technology companies.
Lighthizer's agency will investigate the tax under Section 301 of the Trade Act of 1974 - the same provision the Trump administration used previous year to probe China's technology policies, leading to tariffs on $250 billion worth of Chinese imports.
On Wednesday, the investigation received the approval of Republican Senate Finance Committee Chairman Chuck Grassley and Senator Ron Wyden, the senior Democrat on the panel.
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