US President Donald Trump has accused his French counterpart of “foolishness” over a digital services tax levied by France, hinting that he would tax French wine in retaliation.
Mr Trump voiced his anger in a Tweet directed at the French President, Emmanuel Macron.
France’s three per cent tax is to be levied on sales generated by multinational firms like Google.
The Trump administration argues that it unfairly targets US tech giants.
“France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home country, the US,” Mr Trump wrote on Twitter.
“We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”
The president – who does not drink – also warned US tech giant Apple that it would not be given any tariff relief on parts made in China. “Make them in the USA, no Tariffs!” he wrote.
The French government argues that multinational firms such as Apple, which are headquartered outside the country, pay little or no tax on their sales in France. The digital sales tax was approved by the French senate on Thursday, a week after it was passed by the lower house, the National Assembly.
Any digital company with revenue of more than €750m ($850m; £670m) – of which at least €25m is generated in France – will now be subject to the tax, which will be retroactively applied from early 2019 and is expected to raise about €400m in revenue this year.
At present, they are able to pay little or no corporate tax in countries where they do not have a large physical presence. They declare most of their profits where they are headquartered.
The European Commission estimates that on average, traditional businesses face a 23 per cent tax rate on their profits within the European Union (EU), while internet companies typically pay eight per cent or nine per cent.
France has long argued that taxes should be based on digital, not just physical presence. It announced its own tax on big technology firms last year after EU-wide efforts stalled.
Defending the new tax on Thursday, French Finance Minister Bruno Le Maire said France was “sovereign and decided its own tax rules”. –BBC