France is the first EU Member State to implement a digital tax

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French attempt to defend against big internet companies

French digital affairs minister Cédric O says big tech firms pose ‘a democratic challenge’. Photograph: Eric Baradat/AFP/Getty
France will go ahead with its controversial new tax on the profits of large technology firms such as Google and Facebook despite US threats to retaliate, as the government vows that it is just the start of a crucial rethink of the regulation of tech monopolies.

Cédric O, the French junior minister for digital affairs, told the Guardian that Emmanuel Macron’s drive to make companies including Amazon and Apple pay more and fairer tax would go ahead, despite US warnings that it could open up a new front in the international trade war.

Washington has threatened to retaliate with tariffs of up to 100% on imports of French products such as champagne, cheese, handbags, lipstick and cookware worth $2.4bn (£1.8bn) after a US government investigation found that France’s new digital services tax would harm US technology companies.

A decision on tariffs is expected in the coming weeks, but O said: “We will not withdraw the tax, that is certain. We think retaliation measures are not good for either the US, France or businesses concerned and they could lead to a reaction from the European Union.”

France is to become the first major economy to impose a tax on internet heavyweights. Dubbed the Gafa tax – an acronym for Google, Apple, Facebook and Amazon – the legislation will impose a 3% levy on the total annual revenues of the largest technology firms providing services to French consumers. President Macron has called it a “fairer” response to internet giants who are are currently able to book profits in low-tax countries like Ireland and Luxembourg, no matter where the revenue originates. Donald Trump has called it “foolish” and threatened revenge. France has argued that the tax is aimed at all tech firms and not just American ones.

But O said the tax, although “politically symbolic and democratically important”, was just the tip of the iceberg in terms of new regulations that must be introduced internationally to deal with the powerful tech giants, which he warned had gained a vast footprint on global economies, threatening democracy and risking a public health crisis over hate speech.

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