US and France work on tech tax deal

The United States and France have set a target of two weeks to reach agreement over the latter’s implementation of a digital or tech tax, mostly targeted at US tech firms.

The dispute stems from when the French government decided to impose a digital tax on foreign tech firms at the start of 2019, implementing the law last summer.

By December, the US Trade Representative’s Office said an investigation found that the French tax was “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies”.

It responded by warning of punitive duties of up to 100 per cent on imports from France of champagne, handbags, cheese and other products worth $2.4 billion.

French finance minister Bruno Le Maire was quoted by Reuters yesterday as saying that the two countries would work for a fortnight on a solution.

“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,” he explained, following a meeting 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,” he added, confirming that any international agreement on digital taxation would immediately supersede the French tax.

Other countries are planning to follow this digital tax route, as tech companies have long been criticised for tax practices aimed at booking profits in low-tax countries, regardless of the location of the end customer.

Plans for an EU-wide digital tax were slowed by objections of those countries, like Ireland and Luxembourg, forcing member states like the UK and France to push ahead with their own national levies.

British prime minister Boris Johnston pledged last month to press ahead with the implementation of a digital tax on large internet firms, despite hostility from Trump.

Italy is also set to implement its own tech tax this month, in the form of a three per cent tax on large-scale online sales beginning next year.

For their part, tech companies have defended their tax structures, insisting that they abide by tax laws as they are currently written.

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