France And The US Reach Agreement On Digital Tax

DAVOS, Switzerland (AP) – The French Finance Minister said Wednesday that his country will postpone its tax on the digital businesses of large technology companies such as Google and Facebook in exchange for the US promise not to apply retaliatory sanctions.

The agreement reached between Bruno Le Maire and US Treasury Secretary Steven Mnuchin could avoid a new commercial skirmish between the United States and the European Union in the lucrative high-tech market.

Le Maire said that France would postpone the collection of the digital tax until December – until the next electoral cycle of the United States – but that it will not eliminate it completely until an international agreement is reached.

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The United States, in turn, will refrain from imposing retaliatory tariffs. The United States had threatened to impose tariffs on wine, cheese and other French products.

Le Maire and Mnuchin have agreed to talk about creating a global framework on how to tax business online.

France established in July the tax on large internet companies, including Google and Amazon, of 3% on digital commerce revenues obtained in the European nation.

A French official said technology companies will continue to pay some type of digital income tax this year, either the French tax or a new one negotiated by the group of major industrialized nations, the Organization for Economic Cooperation and Development ( OECD).

The OECD has tried to establish a system that allows France to suspend its unilateral tax.

Le Maire was scheduled to meet Wednesday afternoon with Mnuchin and the OECD secretary general, Mexican José Ángel Gurría, at the World Economic Forum in Davos, Switzerland.

“I certainly hope we will come up with a solution because there is no plan B,” Gurría told The Associated Press.

The French measure is an attempt to turn around the tax evasion of multinationals, which usually pay most of their taxes in the EU country where they operate and often where they pay less taxes. That means that companies pay virtually no taxes in countries where they have large operations.

The tax applies to digital commerce of companies that have global revenues above 750 million euros (833 million dollars) and French revenues exceeding 25 million euros. That threshold is to give more opportunity to emerging companies, known as startups. France claims that technology companies abuse their dominance in the market, especially through tax evasion, and avoid fair competition from others.

The United States government responded to the French initiative by threatening to impose tariffs on a number of goods, including French wine. President Donald Trump made a major threat: imposing tariffs on cars manufactured in the EU, where the auto industry is huge.

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