France Hits Back At US Trade Threat Over Digital Tax

France has issued a public rebuke to the United States over its trade threats to those countries introducing a tax on technology giants – the so called digital or tech tax.

French Finance Minister Bruno Le Maire criticised US threats of trade sanctions over digital service taxes, which he said clashed with its calls for G7 unity on other issues, Reuters reported.

It comes after the Organisation for Economic Cooperation and Development (OECD) earlier this year warned the UK and other countries to hold off on its plans to introduce their own digital tax.

Digital tax

This was because the OECD is currently developing global reforms over where multinational firms should be taxed.

Tech companies have long been criticised by lawmakers for their tax practices that sees them reducing their tax bills by booking profits in low-tax countries (such as Ireland) regardless of the location of the end customer.

Plans for an EU-wide digital tax failed upon the objections of certain countries, forcing member states, most notably France, to push ahead with their own national levies.

In July 2019, Boris Johnson (before he became Prime Minister) had backed a digital tax when he said that the government had to find a way to tax technology giants on their income.

Then in December last year the Prime Minister pledged to press ahead with the implementation of a tech or digital tax on large Internet firms such as Google, Amazon and Facebook, despite US opposition.

The UK had long planned to push ahead with its own national levies, ever since the budget of October 2018.

The Conservative Party had committed to implementing a digital service tax on the revenue of companies if it won the national election in December.

After its decisive election victory, April 2020 was slated as the date the tax would be introduced, but it got delayed by the global Coronavirus pandemic.

However the UK is not alone. Digital services tax is also being adopted in countries such as Italy, Brazil and others.

Unity threat

But the US investigation comes after America investigated France over its digital tax policy.

That dispute was settled when France offered to suspend its digital tax on tech companies’ income in France until the end of the year while the OECD negotiated new rules for the cross-border taxation of big digital companies.

“There’s a real contradiction between the United States’ call for unity within the G7, which we support, and the possibility of new trade sanctions,” Le Maire told his G7 counterparts on a conference call, Reuters reported.

It is estimated that the OECD rules could be agreed by the end of the year, but Coronavirus has slowed talks.

France has warned it will tax big digital companies this year whether there is progress or not.

“We will give no ground on digital tax. I call on all G7 states to step up work at the OECD to reach an international solution by the end of 2020,” Le Maire reportedly said.

A French finance ministry official said his remarks were subsequently echoed by his British, Italian and EU counterparts on the G7 call.