The agreement is expected to bring peace for the U.S.-France relationship (Image via: The Express Tribune)

France and U.S. Reached Agreement on Digital Tax

Kirana Chandra Mumpuni Budiana
Business & Industry
Internet & IT
Aug 27, 2019
2069
On Monday, France and U.S. reached a very good agreement about the digital tax, according to French President Emmanuel Macron. The president announced it in a joint press conference with U.S. President Donald Trump at the G7 summit in Biarritz, France. Macron stated his preference on international taxing digital services rules, which is France removing the national tax for U.S. technology companies. He also said that the tax was not meant to target specific companies, but many French companies would also be impacted.

A spokesperson of France's Finance Ministry announced that France would repeal its tax and reimburse the big technology companies. Those actions will be done as soon as the Organization for Economic Cooperation and Development (OECD) members agree on solidifying international imposition. The new agreement serves as a compromise to the dispute between U.S. and France about its tax rule that is not considered to be fair. France approved a new 3% tax on the revenue that bigger tech companies generate from their digital businesses last month. The rule applies to big companies with more than €25 million (around $27.7 million) income in France and €750 million (around $830 million) worldwide.

U.S. reacted strongly to the new rule by launching Section 301 investigation of the U.S. Trade Act of 1974 in July to determine whether the law amounts to unfair trade practices. The threat also came from U.S. that the country would push back by taxing French wine. Trump asserted that only U.S. can tax its companies, not France. Complaints also came from tech companies, including Google and Amazon by arguing that the rule unfairly target U.S companies.

The compromise from France is expected to diffuse the trade tension between two countries. G20 finance ministers had approved a roadmap of the new tax plan in May. The new agreement both countries have reached hopefully can get signed by leaders in 2020. Despite of the long wait of the agreement to be implemented, this will clear the air for France and U.S. for now.

Source: https://edition.cnn.com/2019/08/26/business/digital-tax-france-us/index.html

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