France and US to settle digital tax row

There are signs that France and the US may be about to settle their differences over the introduction of a digital services tax (DST), after comments at the recent G7 summit suggested the two countries are looking to work together on the issue which has raised the threat of retaliatory tariffs

In July France introduced a 3% tax on annual revenues generated by some companies that provide certain digital services to, or aimed at, French users. The DST applies only to companies with annual revenues from the covered services of at least €750m (£686m) globally and €25m (£23m) in France.

The unilateral move comes ahead of OECD efforts to introduce an international digital tax regime, and was widely seen as an attempt to tax US multinationals such as Amazon, Facebook and Google. The US hit back, setting up a section 301 investigation into whether or not the tax could be viewed as discriminatory and therefore result in trade tariffs on French products.

President Donald Trump has indicated he would consider imposing taxes on French cheese and wine in retaliation.

However, there were signs at the G7 summit in Biarritz that the two sides may be looking to resolve their differences. In an overview of the aims of the meeting, the G7 group stated that they would talk about  international taxation, ‘especially on a coordinated approach to the issue of taxation in the digital sector’.

In a press conference at the close of the event French president Emmanuel Macron told reporters that US  companies that pay the French tax would be able to deduct the amount once a new international deal on how to tax internet companies is agreed via the OECD next year.

Macron said: ‘We’ve done a lot a work on the bilateral basis, we have a deal to overcome the difficulties between us.’

Subsequently, Macron tweeted: ‘Some digital players pay very little tax. This is an injustice that destroys jobs. @realDonaldTrump and I have just agreed to work together on an agreement at the @OECD level to modernize international tax rules. #G7Biarritz.’

The final communique of the Biarritz conference stated: ‘The G7 commits to reaching in 2020 an agreement to simplify regulatory barriers and modernise international taxation within the framework of the OECD.’

Pat Sweet

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