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France’s new digital services tax applies a 3% tax to large digital companies, targeting revenue from online advertising, user data and intermediation platforms. The new tax was signed into law in July 2019 and applies retroactively to the start of the year. France’s argument behind the tax is that since digital companies can do business in countries where they do not have a physical presence, it should be able to tax the revenue because French users create value by viewing ads and making purchases. France has mentioned that about 30 companies will fall in the tax’s scope. Most of the companies hit by the tax will likely be American, including Amazon, Google and Facebook.
The US Trade Representative’s office has warned France that it views the tax as discriminating against US companies and is looking for public feedback on how the French tax discriminates against US companies, burdens or restricts US commerce, or violates France’s obligations under the World Trade Organization’s General Agreement on Trade in Services. It was mentioned that if the trade investigation finds the tax to be discriminatory, the US could impose retaliatory tariffs on France. President Donald Trump said in July that he was considering tariffs on French wine.