Section 301 investigations often result in tariffs if they find that the United States has been unfairly targeted. "The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain USA -based technology companies".
While the so-called "GAFTA" law - named after Google, Amazon, Facebook and Apple - will target all global multinationals including from China, Germany, Spain and Britain, Washington is certain that the legislation was devised specifically against American firms. Currently, the companies pay almost no tax in countries where they have large sales like France. If adopted, the additional 3 percent tax on profits made off French citizens would apply to all firms with global revenue of at least €750 million ($853mn) and French revenue of over €25mn.
"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies", U.S. Trade Representative Robert Lighthizer said in a statement announcing the investigation.
French officials didn't immediately provide comment.
The inquiry, to be conducted by the U.S. trade representative, comes after French Finance Minister Bruno Le Maire proposed a 3% tax on certain revenue that large tech companies earn providing digital services to users in France.
A USA tech-industry trade association this week criticised the French measure, saying tax disputes should be settled through a multilateral negotiation now being led by the Organisation for Economic Cooperation and Development.
USTR said in a statement the "services covered are ones where USA firms are global leaders".
Google has since defended its global tax payments and said it supports a new "comprehensive and multilateral agreement" on tax.
Amazon called the probe "an important step toward successfully addressing the poorly constructed, discriminatory French (tax), which if implemented, will cause significant harm to American and French consumers alike".
The tax could lead to trade penalties from Washington as President Trump's probe is also likely to worsen tension between the U.S. and Europe.