France puts off tax hikes for major technology
DAVOS, Switzerland — France will delay its tax on big tech firms like Google and Facebook in exchange for the United States’s promise to hold off retaliatory tariffs — a potential sign of goodwill in the U.S. and European Union’s increasingly tense relations over trade.
After U.S. President Donald Trump threatened the E.U. with bigger tariffs, French Finance Minister Bruno Le Maire said Wednesday he had negotiated a truce with U.S. Treasury chief Steven Mnuchin on the sidelines of the World Economic Forum in Davos, Switzerland.
Le Maire said France would delay collection of the digital tax until December, parking the issue until after the next U.S. presidential election where Trump hopes to secure another fouryear term.
The 3% tax on the revenues of big internet companies only came into force last July and prompted outrage in the U.S., which launched retaliatory tariffs against French wine, cheese and other products.
The two countries eventually agreed a month later to try to create an international agreement on how to tax digital business by mid-2020, but neither side would back off their punitive taxes. They agreed to on Wednesday in Davos.
Le Maire, Mnuchin and the head of the Paris-based Organization
or Economic Co-operation and Development, José Ángel Gurría, will meet Thursday to work on an international approach to taxes on digital companies.
“I absolutely expect we will come to a solution because there is no plan B,” Gurría told The Associated Press earlier in Davos.
It remains unclear whether they can find an international agreement, as it would involve dozens of countries with often conflicting views.
Le Maire said France was not in a position to scrap its tax until such an international accord has been reached and insisted that companies reliant on internet business need to pay taxes wherever they are based and wherever they operate.
The French measure is an attempt to get around tax avoidance measures by multinationals, which pay most of their taxes in the E.U. country they are based in — often at very low rates. That effectively means the companies pay next to no tax in countries where they have large operations.
“Digital companies will pay their fair tax in 2020,” Le Maire told reporters in Davos.
At face value, the deal appears to dial down the risk of a wider trade war between the U.S. and the E.U., of which France is part of.
However, Trump and Mnuchin both took a noticeably tough line on the E.U. that stoked concerns that the months ahead could see a new escalation in trade tensions.
Trump, who last week reached an interim trade deal with China easing tensions between the world’s two biggest economies, ratcheted up his criticism of the E.U. and said its approach to trade was in fact worse than Beijing’s.
French Finance Minister Bruno Le Maire (left) and European Trade Commissioner Phil Hogan attend a media conference after their meeting Tuesday in Paris.