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US objects to French tax on tech firms as G-7 gets under way

The Trump administration is objecting to France’s plan to tax Facebook, Google and other U.S. tech giants, a rift that’s overshadowing talks between seven longtime allies near Paris this week on issues ranging from digital currencies to trade.

As finance ministers from the Group of Seven rich democracies gathered Wednesday at a chateau in Chantilly, near Paris, U.S. Treasury Secretary Steven Mnuchin planned to take a tough line against host France.

He was going to object to France’s proposed 3 percent tax on revenues of large tech companies with the G-7 host, French Finance Minister Bruno Le Maire, according to a senior U.S. Treasury official.

The controversial tax, which the French parliament passed days ago and could be signed into law within weeks, has already provoked a strong rebuke from the White House, which said it could lead to U.S. tariffs on French imports.

The rift risks feeding into broader disagreements, including on trade, after the U.S. imposed tariffs on some EU goods last year, drawing retaliation from Europe.

“We are very disappointed that France has passed a unilateral service tax,” said the Treasury official, who said Mnuchin was set to raise the issue during Wednesday’s bilateral meeting with Le Maire. The official spoke on condition of anonymity as the meeting had not yet taken place.

French officials have indicated the digital tax is intended to spur an international agreement during the G-7 meeting and pledged it would be withdrawn if a deal is forged. The strategy is meant to provide negotiating leverage with the U.S., an approach that some have compared with the go-it-alone approach of U.S. President Donald Trump.

British Chancellor of the Exchequer Philip Hammond, left, Federal Reserve Chair Jerome Powell, center, and U.S Treasury Secretary Steve Mnuchin attend a working session at the G-7 Finance Wednesday July 17, 2019 in Chantilly, north of Paris. The Trump administration is objecting to France's plan to tax Facebook, Google and other U.S. tech giants, a rift that's overshadowing talks between seven longtime allies near Paris this week on issues ranging from digital currencies to trade. (AP Photo/Michel Euler)

“We (are)… accepting to negotiate a new global taxation on digital activities,” Le Maire told reporters outside the royal stables at Chantilly, a town famed today for horse racing.

Discord is no stranger to G-7 meetings. Last June, Trump roiled the G-7 summit in Canada by first agreeing to a group statement on trade only to withdraw from it while complaining that he had been blindsided by Canadian Prime Minister Justin Trudeau’s criticism of Trump’s tariff threats. In an extraordinary set of tweets, Trump threw the G-7 talks into disarray.

Officials seem to be prepared for the potential for ugly divergences at this week’s G-7, with Mnuchin saying it could end with just a report of the discussion — rather than the traditional final statement signed by all.

The regulation of technology companies is emerging as a major issue around the world. The U.S. is following the European Union’s lead in taking a closer look at whether some of them are too big for the good of the wider economy. The topic was underscored Wednesday, when EU regulators in Brussels opened a formal antitrust investigation into Amazon , echoing similar ones against the likes of Google and Microsoft.

Beyond the U.S. and France, the G-7 includes Germany, Britain, Italy, Canada, Japan and representatives of the EU.

Their talks come against a backdrop slowing global growth and Trump’s America-first trade policies, which have led to a tariff war with China on top of the tensions with Europe.

Where the U.S. may find more common ground with its G-7 partners will be in its mistrust of cryptocurrencies like Facebook’s recently announced Libra, a position shared by the French.

Le Maire hopes to lead on this issue, singling out Libra for scrutiny at the meeting, which will prepare the framework for a summit of the G-7 heads of state and government in August in the French Atlantic resort of Biarritz.

“The red line for us is that Libra cannot and should not transform itself into sovereign currency,” Le Maire warned reporters ahead of the meeting.

“We won’t accept that multinationals emerge to be private states —  that’s to say multinationals that would have the power of a state but not the obligations linked to the sovereign states, notably the control by citizens,” he added.

Le Maire said that, unchecked, Libra could exploit Facebook’s vast trove of data and lead to an increased risk of embezzlement, the financing of terrorism and the destabilizing of sovereign money.

“Libra will be pegged to a basket of currencies including the dollar and euros. At a given moment, what if Libra decides to rebalance itself in favor of the euro, in favor of the dollar?” he asked.

“It will have direct repercussions on the currency’s stability.”

The U.S. Congress is holding a two-day hearing on Libra this week and lawmakers demanded to know why Facebook, which has massive market power and a track record of scandals, should be trusted with such a far-reaching project.


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