Bruno Le Maire, France's Economy Minister, defended France's sovereign right to draw up its tax scheme a day after President Donald Trump's Administration ordered a probe into the fiscal policy, which could escalate toward sanctions or tariff hikes.
Le Maire said: "I want to highlight that this is the first time in the history of relations between the US and France that the American administration has decided to open a Section 301 procedure. I firmly believe that, between allies, we can and should be able to settle our differences without threats," reported Efe news.
"France is a sovereign nation. It decides on its fiscal policy in a sovereign manner and it will continue to decide its fiscal policy in a sovereign manner."
The US Trade Representative can open a Section 301 against a foreign nation if it believes a nation is contravening trade agreements or damaging US commerce.
It is the same mechanism Trump used when he kicked off his trade war with China, which was centered on Washington's trade deficit with Beijing.
French senators approved the so-called GAFA tax, an acronym for Google, Apple, Facebook and Amazon, on Thursday. The policy levies higher taxes on digital giants providing services to French netizens and plug gaps that allow those companies to avoid taxes on huge amounts of profit generated in the country.
But US officials saw the measures is unfair for American firms.
Robert Lighthizer, the US trade representative, said: "The US is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies."
Le Maire said the new legislation in France could accelerate discussions on the topic of digital service tax at the Organization for Economic Co-operation and Development with the aim of drumming a universal policy.
"We will find common solutions, a solution at OCDE level, and we will move onto agreements instead of threats," he told senators.
( With inputs from IANS )