France, US To Attempt Digital Tax Agreement In Two Weeks

The digital tax dispute between the United States and France has been given a tight deadline for the two sides to reach an agreement.

The dispute stems from when France decided to impose a digital tax on foreign (mostly US) tech firms at the start of 2019. It implemented the law in the summer of 2019.

Last month in December 2019, the United States US Trade Representative’s office said its “Section 301” investigation found that the French tax was “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies”.

Digital tax

And the US proposed a harsh response – warning it may slap punitive duties of up to 100 percent on $2.4 billion in imports from France of champagne, handbags, cheese and other products.

Now France and the United States have given themselves two weeks to try to resolve a row over a French digital tax, French Finance Minister Bruno Le Maire was quoted as saying by Reuters on Tuesday.

“I had a long talk with US Treasury Secretary Steven Mnuchin. We have decided to step up efforts to try and find a compromise, within the OECD, on digital tax,” Le Maire told reporters after a meeting in Paris with EU Trade Commissioner Phil Hogan.

“We gave each other precisely 15 days, until our next meeting, which is planned on the sidelines of Davos at the end of January,” the minister reportedly said, referring to the World Economic Forum that is held in the Swiss ski resort.

“This is a more general issue between the United States and Europe,” Le Maire said, stressing other EU nations were planning their own national digital taxes.

He also confirmed any international agreement on digital taxation would immediately supersede the French tax.

Global tech tax rules are expected to be agreed sometime this year.

Le Maire reportedly said he hoped there would be no US. sanctions during the two-week window convened with Mnuchin, adding that any decision by Washington to take action would in effect bring an end to the discussions.

On his first official visit to Paris as new EU Trade Commissioner, Phil Hogan said the European Commission “will stand by France” in its digital tax dispute with Washington.

Tech taxes

Other countries are planning to follow this digital tax route, as tech companies have long been criticised for their tax practices that sees them reducing their tax bills by booking profits in low-tax countries (such as Ireland) regardless of the location of the end customer.

Plans for an EU-wide digital tax foundered upon the objections of those countries, forcing member states including the UK and France to push ahead with their own national levies.

The UK has yet to set a date, although Prime Minister Boris Johnston in December 2019 pledged to press ahead with the implementation of a tech or digital tax on large Internet firms, despite hostility from US President Donald Trump.

Italy is to implement its own digital or tech tax from January 2020, when it will implement a 3 percent tax on large-scale online sales beginning next year.

Spain and Germany are also proposing their own national digital taxes.

For their part, tech companies have previously defended their tax structures, and insist they abide by tax laws as they’re currently written.

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Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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