US President Donald Trump last month threatened to punish Paris for a new tax on tech giants like Netflix and Amazon.

French Finance and Economy Minister Bruno Le Maire visits a shopping area Rue Montorgueil in Paris to talk about the economic impacts of the strikes, January 3, 2020
French Finance and Economy Minister Bruno Le Maire visits a shopping area Rue Montorgueil in Paris to talk about the economic impacts of the strikes, January 3, 2020 (AFP)

French Finance Minister Bruno Le Maire urged the United States on Monday to renounce threatened sanctions on France in a dispute over taxation of tech giants and warned of possible EU retaliation.

"This trade war is in no one's interest and I call on our American friends to display wisdom, to return to their senses," Le Maire told France Inter radio as the US government moves towards imposing sanctions.

President Donald Trump last month threatened to punish Paris for a new tax on tech giants such as Netflix and Amazon, unveiling sky-high retaliatory duties on $2.4 billion of French wines, makeup and leather handbags.

US trade officials are accepting written comments until Monday and on Tuesday are to hold a public hearing to allow individuals and companies to comment on the punitive measures.

Le Maire issued a warning that it would respond if the tariffs are put into place.

"If the Americans decide to go through with it, to put into place sanctions against the tech tax when they are for such a tax ... in that case we will retaliate," he said, adding he plans to speak with his US counterpart Steven Mnuchin later in the day.

Le Maire said that he would also meet with EU Trade Commissioner Phil Hogan on Tuesday and "we'll study the possibility of commercial retaliation".

Finally, Le Maire wrote to US Trade Representative Robert Lighthizer to urge him to not impose sanctions on France.

"I insist that our tax is not discriminatory against US companies," said the letter.

Virtual economy, real tax

France last year approved a new levy on tech firms as international efforts dragged on to find a new model to tax their revenues earned via online sales and advertising.

Tech companies often pay little in many countries owing to their lack of physical presence.

The levy will see such firms paying up to three percent of their revenues earned in France.

Washington says that US companies such as Google, Apple, Facebook and Amazon have been singled out by the French tax.

In August, France agreed to refund any taxes collected in excess of the yet-to-be-decided international formula.

But as proposals for digital services taxation gain popularity around the world, Washington has been left to pound the table ever harder.

The Trump administration could impose duties of up to 100 percent of the value of French imports including such emblematic goods as champagne and camembert.

Le Maire called on the United States to seek a global solution to the problem of firms generating massive revenue with online sales and paying little in taxes via negotiations underway at the Organisation for Economic Co-operation and Development.

After blocking the OECD talks for several years, the US relaunched them last year only to make proposals in December which France has rejected and have cast doubt on the goal of reaching a global deal this year.

Le Maire urged Washington "to work towards a compromise at the OECD to avoid extreme situations that benefit no one."

If the United States follows through with its threat it will be the second time that France has been hit as in mid-October Washington imposed sanctions following a long legal battle over European subsidies to aircraft manufacturer Airbus.

The sanctions saw 10 percent punitive tariffs imposed on EU aircraft and 25 percent on a variety of food products including French wine.

Source: AFP