The US said it was “very concerned” by the planned digital service tax, a move which could see the States retaliate by imposing new tariffs or other trade restrictions.
In a statement announcing the investigation, US trade representative Robert Lighthizer said there were concerns the tax “unfairly targets American companies”.
The proposed 3% tax on French revenue of large internet companies is expected to pass the French Senate and could yield €500m (£450m) a year.
It would target companies with at least €750m (£675m) in annual revenues and apply to revenue from digital business, such as online advertising.
Companies including Google, Apple, Amazon and Facebook would likely be affected.
The United States Trade Representative (USTR) said in a statement “services covered are ones where U.S. firms are global leaders.
“The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies.”
Mr Lighthizer said the US President had directed that the investigation find out whether the tax is “discriminatory or unreasonable and burdens or restricts United States commerce”.
Previous investigations by the US have included Chinese trade practices and EU subsidies on large commercial aircraft.
The tax would hit some 30 companies, many of which are American, but also Chinese, German, Spanish and British companies.
One French firm and several firms with French origins that have been taken over by foreign companies will also be included in the tax plans.
Technology industry lobby group ITI has urged the US not to impose tariffs in retaliation.
“We support the U.S. government’s efforts to investigate these complex trade issues but urge it to pursue the 301 investigation in a spirit of international cooperation and without using tariffs as a remedy,” Jennifer McCloskey, ITI’s vice president of policy, said.
But the investigation was praised by Senate finance committee chairman Chuck Grassley and Democrat Senator Ron Wyden.
In a joint statement, they said: “The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers.”
“The United States would not need to pursue this path if other countries would abandon these unilateral actions and focus their energies on the multilateral process that is under way.”
Author: Emily Mee