The Group of Seven rich democracies’ top finance officials gathered Wednesday at a chateau near Paris in search of common ground on the threats posed by digital currencies. The two-day meeting, however, risks being overshadowed by rifts over France’s plan to tax Facebook, Google and other American technology giants.
U.S. Treasury Secretary Steven Mnuchin plans to raise objections to a proposed French 3% tax on revenues of large tech companies to the host, French Finance Minister Bruno Le Maire, according to a senior Treasury official.
The controversial tax, which the French parliament passed last week and could be signed into law within weeks, provoked a strong rebuke from the White House last week, who launched an investigation into whether that could lead to U.S. taxes 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 retaliaton from Europe.
“We are very disappointed that France has passed a unilateral service tax,” said the Treasury official, who said Mnuchin will raise the issue during a bilateral meeting with Le Maire on Wednesday. The official spoke on condition of anonymity as the meeting had not yet taken place.
France has indicated the tax was intended to spur international action during the G-7 meeting and be withdrawn if an international agreement is forged.
The regulation of technology companies is emerging as a major issue for countries. 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 issue 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.
Le Maire, is joining his counterparts from Germany, Britain, Italy, Canada, Japan and the United States for the meeting in Chantilly, north of the French capital. Hanging over the ministers when they sit down for day one’s working dinner: Slowing global growth and the America-first trade policies of U.S. President Donald Trump, 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 Facebook’s Libra currency for scrutiny at the meeting that will prepare the framework for a summit of the G-7 heads of state and government, scheduled for Aug. 24-26 in the French Basque Country 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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McHugh reported from Frankfurt, Germany.