U.S. Targets Soap But Not Wine in Counter to French Digital Tax

The U.S.announced 25% tariffs on a series of French goods worth about $1.3 billion, in a long-running battle between the two countries over taxes on technology giants.

The Office of the U.S. Trade Representative said Friday that it would again delay implementation of the levies for up to 180 days as France has not yet started collecting its digital tax. The Trump administration is also allowing more time for ongoing discussions on a global deal at the Organization for Economic Cooperation and Development.

Items targeted include French makeup, soap and handbags. It doesn’t include wine and cheeses that were part of the Trump administration’s proposed list.

France has held firm on its plans to resume collection of a national digital tax that hits technology giants including Amazon.com Inc., Alphabet Inc.’s Google and Facebook Inc., saying earlier Friday that it wouldn’t be swayed by threats of U.S. sanctions.

“France’s response will be unchanged,” Finance Minister Bruno Le Maire said in Brussels. “If there is no international solution by the end of 2020, we will, as we have always said, apply our national tax.”

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The U.S. withdrew last month from international talks over a digital-tax deal after failing to reach an agreement on developing a global levy. The OECD has been trying to find agreement among almost 140 countries to address how multinationals — particularly big tech companies — are taxed in the nations where they have users or consumers. An international deal would prevent dozens of countries implementing their own versions of levies.

Several European countries — including Austria, France, Spain, Hungary, Italy, Turkey and the U.K. — have already announced plans for a digital services tax. Many others have discussed implementing one and India in April expanded such a levy that it uses.

“We call on the U.S. to return to the OECD negotiations on taxing digital giants,” Le Maire said. “Sanctions are not a way of operating between countries that are friends, as the U.S. and France are.”

Clear Signal

The announcement sends a clear signal to France and other countries that are considering similar measures that there are consequences to singling out American tech companies, said Clete Willems, a partner at Akin Gump.

Still, he added, the tariff delay provides a valuable opportunity to solve this multilaterally.

“Both sides need to compromise,” he said. “France needs to back away from trying to tax digital companies before all global service providers and the United States needs to stop insisting that the new rules be optional.”

U.S. lawmakers weighed in shortly after the announcement to express their support.

“Retaliatory tariffs aren’t ideal but the French government’s refusal to back down from its unilateral imposition of unfair and punitive taxes on U.S. companies leaves our government with no choice,” the top Republican, Chuck Grassley, and Democrat Ron Wyden on the Senate Finance Committee — with jurisdiction over taxes — said in a joint statement.

— With assistance by Alexander Weber

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