France has hit back against US plans to investigate a planned tax on big digital companies, saying it was free to decide how it applies taxes as a sovereign country.
On Wednesday, Donald Trump ordered an investigation into the French tax, an inquiry that could lead to the US imposing tariffs or other trade restrictions.
The move opens a new trade dispute with a European ally and comes as the French Senate prepares for a final vote on the tax on Thursday.
“For us, [the tax] is totally compliant with international agreements. Countries are sovereign on tax matters. So for us it is inappropriate to use a trade instrument to attack a sovereign state,” a finance ministry source said.
France pushed ahead with the tax after EU countries failed to agree a levy across the bloc in the face of opposition from Ireland and some Nordic countries.
That prompted countries including France, Austria, Britain, Spain and Italy to announce plans for their own tax at the national level.
The UK chancellor, Philip Hammond, promised to introduce a digital sales tax in his budget last year to ensure that “global giants with profitable businesses in the UK pay their fair share”.
He said the UK could no longer wait for “painfully slow” discussions at international level and would instead introduce a 2% tax on certain types of sales, which he said would raise £400m a year.
France says the tax is needed because big internet companies such as Facebook and Amazon are able to book profits in low-tax countries no matter where the revenue originates from.
Paris has pledged to drop its tax as soon as an international agreement is reached at the Organisation for Economic Co-operation and Development overhauling decades-old cross-border tax rules for the digital era.
The French government says the tax does not specifically target US companies and will affect European and Asian firms as well. The tax will apply a 3% levy on revenue from digital services earned in France by firms with more than €25m (£22.5m) in French revenue and €750m worldwide.