Transfer Pricing Report

France Says U.S. Agreed on a Path to Global Tech Tax Accord

Jan. 23, 2020, 3:09 PM

The U.S. and Europe are making progress toward a global pact on the taxation of digital services, with France’s finance minister, Bruno Le Maire, saying on Thursday that American officials agreed on a blueprint for negotiations.

Speaking at the World Economic Forum in Davos, Switzerland, Le Maire said that Treasury Secretary Steven Mnuchin had agreed to drop a U.S. demand that the tax should be optional, a key sticking point. Participants from more than 135 nations will meet at the Organisation for Economic Cooperation and Development next week to approve the architecture for a deal.

“We’ve found an agreement between France and the U.S. on the basis for work on digital tax at the OECD,” Le Maire said after a meeting with Mnuchin. “The optional aspect is no longer on the table -- that was part of the negotiation overnight.”

When asked at a separate event in Davos, Mnuchin declined to answer if he agreed to discard the requirement for the tax to be optional. A spokeswoman from the U.S. Treasury Department didn’t reply to a request for comment.

Rising Tensions

The progress marks a rare bright spot in transatlantic relations and comes the same week that President Donald Trump asserted that the European Union treats the U.S. unfairly and that it is “more difficult to do business with than China.” Mnuchin also raised the possibly of hitting countries with tariffs on their car exports if they “want to arbitrarily put taxes on our digital companies.”

Last year, France introduced a 3% levy on the digital revenue of companies that make their sales primarily online, such as Facebook Inc. and Alphabet Inc.’s Google. The U.S. threatened tariffs as high as 100% on $2.4 billion of French goods, saying the measure discriminates against American businesses.

Le Maire had already trumpeted a partial deal on Wednesday that would see the U.S. hold off on tariffs and France delay collecting its tax on multinational digital firms until the end of the year. The two sides worked through the night to then agree on how to move forward with talks at the OECD, Le Maire said.

If the talks fail, Le Maire said France would reinstitute its national version of the tax. European countries including the U.K., Italy and Spain are also moving ahead with their own digital services levies.

“It’s absolutely decisive for the world order to have a fair and efficient international taxation system,” Le Maire said. “European countries are tough and that’s good news because we are registering progress.”

To contact the reporters on this story:
William Horobin in Paris at whorobin@bloomberg.net;
Saleha Mohsin in Washington at smohsin2@bloomberg.net

To contact the editors responsible for this story:
Fergal O’Brien at fobrien@bloomberg.net;
Ben Sills at bsills@bloomberg.net

Richard Bravo, Nikos Chrysoloras

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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