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Economy

'My wine's better than yours': Trump furious over France's GAFA tax

media French President Emmanuel Macron and U.S. President Donald Trump on the sidelines of D-Day commemorations, June 6, 2019 Ludovic Marin/REUTERS

US President Donald Trump vowed "substantial" retaliation against France on Friday for a tax targeting US tech giants, known as the Gafa. He repeated his threat to slap tariffs on French wine.

"France just put a digital tax on our great American technology companies," Trump tweeted about the law, which targets US giants like Google, Apple, Facebook and Amazon.

"We will announce a substantial reciprocal action on Macron's foolishness shortly," he said suggesting it might be targeting wine or something else.

Trump and French President Emmanuel Macron spoke on the phone Friday, discussing the digital services tax among other issues, the White House said.

It did not say whether potential tariffs on French wine were part of the conversation.

The row is linked to a law passed by the French parliament this month on taxing digital companies for income even if their headquarters are elsewhere.

Britain has announced plans for a similar tax.

France not backing down

French Economy Minister Bruno Le Maire indicated that Paris was not backing down on its tech taxes.

"Universal taxation of digital activities is a challenge for us all. We want to reach an agreement within the G7 and the OECD. In the meantime, France will implement its national decisions," Le Maire said.

According to the French government website, the purpose of this tax is to achieve a fairer and more efficient tax system, which taxes value where it exists, "for example in the data, in order to finance public services, schools, nurseries and hospitals."

"Today digital giants pay 14 percentage points less tax than European SMEs. The fact that these companies pay less tax than a cheese producer in Quercy is a real problem," Economy Minister Bruno Le Maire explained in an interview in the Le Parisien newspaper on 3 April.

France taking the lead

The tax will affect companies with a worldwide turnover on their digital activities of over 750 million euros and a turnover in France of over 25 million euros. About thirty groups will be affected, including but not limited to Google, Apple, Facebook and Amazon. It is therefore not an anti-American tax.

It will apply to three percent of digital turnover (advertising revenues, commissions received by the platforms, revenue from the resale of personal data) generated in France from 1 January 2019, leading to proceeds that "should quickly reach 500 million euros," added Bruno Le Maire.

Deputy White House spokesman Judd Deere noted that France's digital services tax was already the subject of an investigation at the US Trade Representative's office, potentially opening the door to economic sanctions.

Washington is "extremely disappointed by France's decision to adopt a digital services tax at the expense of US companies and workers," Deere said.

The subject of wine is a touchy one

Already in June, Trump had hinted at the possiblity of taxing French wines, suggesting extra customs duties to even up what he described as an unfair market.

"France taxes wine a lot and we don't tax French wine" he told the American channel CNBC in a recent interview.

US wines "look" better

According to France's Federation for Wine and Spirit Exporters, a bottle of American white wine with an alcohol volume of 13 percent will be subjected to an 11-cent tax, while an equivalent bottle of European wine would pay about half that to enter the US.

The EU is the biggest importer of US wines. However, American wine exports are dwarfed in volume by the far bigger output from France, Italy and Spain.

Trump, a proud teetotaler, has said he'd "always liked American wines better than French wines even though I don't drink."

When asked how he came to this conclusion, he responded with "I just like the way they look."

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