US close to a compromise with France over its ‘unfair’ digital tax, Trump says

Paris and Washington have agreed a proposal to revise France’s digital services tax regime, according to US President Donald Trump. He told reporters at the G7 summit on Monday that the sides were close to reaching a compromise.

The agreement would see France repay tech companies the difference between the amount collected under its current digital tax model and the amount owed by firms under a new OECD (Organisation for Economic Co-operation and Development) system.

In July, France has introduced a digital tax on big technology firms, after having accused them of exploiting global tax loopholes. A three-percent levy targets around 30 big tech companies, including Facebook, Amazon and Google. It applies to organizations with annual revenues of more than €750 million ($830 million) arising from “digital activities,” including €25 million ($27 million) carried out in France.

France’s government said then that the measure would raise €500 million ($556 million) per year.

The law on digital tax was passed, despite Washington claiming it will ‘unfairly’ target Silicon Valley giants and threatening the imposition of sanctions on France.

“If they do that ... we’ll be taxing their wine like they’ve never seen before,” the US president told reporters before the summit, as cited by Reuters.

EU chief Donald Tusk said on Saturday that the EU would “respond in kind” if France were targeted by Washington in response to its digital tax. A broader, EU-wide effort on taxing digital companies failed last year. Since then countries like the UK, Italy, Spain and Austria were considering enacting their own versions of a digital tax.

French President Emmanuel Macron told reporters on Sunday he hoped that negotiations at the OECD would lead to an international deal on taxing digital services by the end of 2020. That would allow France to withdraw its national tax.

Big US tech companies have strongly opposed France’s digital tax, saying they would prefer a multilateral agreement.

The Organization for Economic Cooperation and Development is currently reviewing digital taxation but has said it won’t reach a conclusion until next year.

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