OPINION - EDITORIAL

OTHERS SAY: France's tech tax is wrong. So is Trump's Response.

Fed up with big technology multinationals, most of which just happen to be American, France wants to tax them more heavily.

Last week, French lawmakers passed a measure that would impose a tax of up to 5 percent on digital companies with annual global revenue of more than $845 million and local revenue of more than $28 million. "When France shows its will, that's when things change," Finance Minister Bruno Le Maire has said, with Gallic modesty. Unfortunately, things aren't changing for the better.

This measure is thoroughly ill-conceived. Because it applies to revenue rather than profits after expenses, it could end up taxing companies that don't make money. Because France is enacting it in isolation, it's likely to lead to double taxation and onerous compliance costs. With vague and ambiguous rules, it's causing needless risk and uncertainty. And for all the trouble, it'll earn a pittance: about $560 million a year. That's about a 1 percent increase in corporate tax revenue.

America, then, has every right to object. It doesn't help that big U.S. tech companies are currently besieged by European Union regulators. Unfortunately, President Donald Trump is inclined to make a bad situation worse. Last week, his administration said it was opening a "Section 301" investigation into the tax. Under U.S. law, if such a probe concludes that another country has engaged in unfair trade practices, the president has broad discretion to impose tariffs in response.

A far better way to address France's misguided protectionism is through the World Trade Organization's dispute-settlement system, where the U.S. has been largely successful over the years. That might take time, but it would achieve the administration's objectives, limit collateral damage, and demonstrate that the U.S. still upholds the rules and values it built into the system over decades.

Editorial on 07/23/2019

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