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Donald Trump

The French Senate on Thursday voted in favour of the introduction of a controversial 3% digital tax on the French revenues of US tech giants selling digital services into the country, defying criticisms by US President Donald Trump of the plan.

The new law will cover the revenues of the so-called GAFA companies – Google, Apple, Facebook, and Amazon – as well as companies like Airbnb and Instagram.

The new tax, which is expected to raise some $562m (€500m), is a temporary measure, introduced to cover the interim period before an international agreement is put in place.

It will apply to companies with worldwide digital revenues of at least $843m (€750m) and at least $28m (€25m) of revenues within France.

On Wednesday, Trump ordered a Section 301 investigation into the new tax to establish whether it was in breach of existing trade deals between the US and France.

“The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies,” the United States Trade Representative (USTR) said in a statement.

Amazon welcomed the investigation, calling the tax proposal “poorly constructed” and “discriminatory”.

“We applaud the Trump Administration for taking decisive action against France and for signalling to all of America’s trading partners that the U.S. government will not acquiesce to tax and trade policies that discriminate against American businesses,” the Amazon statement said.

French Finance Minister Bruno Le Maire batted back the move. 

“Between allies, we should and must sort out our differences without using threats,” he said.

France is the first European territory to introduce such a tax. The European Union had mooted introducing a pan-European digital tax but the idea stalled after member states Ireland, Sweden, Denmark and Finland raised objections.

France-based companies operating in the digital sphere have long complained that global digital players are at an unfair advantage because they are not subjected to the same taxes and obligations as local operations.