WASHINGTON (REUTERS) – US President Donald Trump said on Friday (July 26) the United States would hit France shortly with a”substantial reciprocal action” after Paris announced a tax aimed at US technology companies.

“If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly,” Trump tweeted, referring to French President Emmanuel Macron.

“I’ve always said American wine is better than French wine!”

Last week, Trump spoke with Macron and expressed concerns about the country’s proposed digital services tax, the White House said.

White House spokesman Judd Deere said the United States “is extremely disappointed by France’s decision to adopt a digital services tax at the expense of US companies and workers.

France’s unilateral measure appears to target innovative US technology firms that provide services in distinct sectors of the economy.”

He added “the administration is looking closely at all other policy tools.”

The US Trade Representative’s Office (USTR) last month said it would hold a hearing on Aug 19 in its probe of France’s new planned tax on big technology companies after Trump ordered an investigation into the tax, which could lead to the United States imposing new tariffs or other trade restrictions.

USTR said the levy was an “unreasonable tax policy.” The plan departs from tax norms because of “extraterritoriality; taxing revenue not income; and a purpose of penalizing particular technology companies for their commercial success,” it said.

USTR added that statements by French officials suggest the tax will “amount to de facto discrimination against U.S.

companies … while exempting smaller companies, particularly those that operate only in France.” The tax is due to apply retroactively from the start of 2019. USTR said that calls into question the fairness of the tax.

Two weeks ago, the French Senate approved the 3 per cent levy that will apply to revenue from digital services earned in France by firms with more than €25 million (S$38 million) in French revenue and €750 million worldwide.

Other EU countries including Austria, Britain, Spain and Italy have also announced plans for their own digital taxes.

They say a levy is needed because big, multinational Internet companies such as Facebook and Amazon are currently able to book profits in low-tax countries like Ireland, no matter where the revenue originates. Political pressure to respond has been growing as local retailers on main streets and online have been disadvantaged.

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