Davos WEF

French finance minister says the battle over digital tax is not over yet

Key Points
  • Both agreed to develop an international framework for digital taxation at the OECD level, but they disagree on how to shape it.
  • The United States believes companies should be able to decide whether to reallocate a portion of corporate profits, whereas France believes the system should be compulsory.
French Economy and Finance Minister Bruno Le Maire attends a press conference during the World Economic Forum (WEF) annual meeting in Davos, on January 22, 2020.
FABRICE COFFRINI

DAVOS, Switzerland – The United States has agreed to suspend tariffs on French goods over a digital taxation dispute, but there is still work to be done between the two, France's finance minister said Wednesday.

The two countries have been at odds over taxation of tech companies since France announced a levy of 3% on sales generated by digital giants, such as Google and Facebook. Paris argued that digital firms were paying little to no tax; but the United States said the levy was particularly "burdensome" for American firms and Washington threatened to impose tariffs on French products.

Speaking to reporters at the World Economic Forum, Bruno Le Maire, the French finance minister, said his country had accepted a postponement of the payments to the end of 2020.

"In exchange of this postponement … the U.S. accepts to suspend the sanctions against France," Le Maire said.

However, this is not the end of their dispute. Both agreed to develop an international framework for digital taxation at the OECD level, but they disagree on how to shape it. The United States believes companies should be able to decide whether to reallocate a portion of their corporate profits, whereas France believes the system should be compulsory.

"We still need to have a clear understanding of what will be the working basis at the OECD. And we want this basis to be solid, credible and fair. An optional basis would not be credible," Le Maire said.

"So, there's still some work to be done," the French politician said.

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Provided there is an agreement among OECD countries, France would put an end to its national digital tax.

In the meantime, other European countries have developed their own tax levies, including Italy, Austria and the U.K.

Earlier on Wednesday, U.K. Finance Minister Sajid Javid told CNBC that the U.K. would go ahead with its own digital services tax in April.

"It is a proportionate tax, and a tax that is deliberately designed as a temporary tax," Javid said before adding, "It will fall away when there is an international agreement."

In Davos, Le Maire told CNBC that he has been speaking with the British, Italian and Spanish governments about their own national plans for digital taxation. "We share the same assessment," he said, "it is not worth entering a trade war and not worth having many national taxations."

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