France risks US ire with vow to impose digital tax in 2020

Source: AFP Published: 2020/11/26 19:43:40

France will enforce a new digital levy for online technology giants in 2020, breaking a truce with Washington over the long-running tax fight that could prompt a round of punitive US tariffs on French goods.

Pedestrians walk past the Christmas window display at the Galeries Lafayette department store in Paris, France, November 22. Department stores have unveiled their Christmas window displays although remaining closed for business in duration of the second confinement across France. Photo: Xinhua

"The companies subject to this tax have been notified," a French finance ministry official said Wednesday, referring in particular to Google, Amazon, Facebook and Apple, collectively referred to as the "GAFA" in France. 

A deposit on the estimated taxes owed will be required in December, with the remainder due in 2021, the official said.

US President Donald Trump has assailed the tax as unfairly targeting American tech heavyweights, and threatened in 2019 import duties of 25 percent on $1.3 billion worth of French products, including cosmetics and handbags by renowned brands.

The US Trade Representative did not respond to a request for comment from AFP.

France and many other European countries are taking action after intense public pressure to make US multinationals pay a larger share of their revenues in taxes in the countries where they operate. 

Under EU law, companies in the US can declare profits from across the bloc in a single member state - and most pick low-tax jurisdictions such as Ireland or the Netherlands.

In 2019, French President Emmanuel Macron's government enacted a 3-percent levy on the profits from providing online sales for third-party retailers - such as Amazon's Marketplace - on digital advertising and the sale of private data. 

The taxes brought in around 400 million euros ($475 million) in 2019, an amount expected to grow steadily in the coming years. But Paris struck a deal with Trump's administration in 2019 to suspend collection of the levy while seeking a global digital tax deal under the auspices of the Organisation for Economic Cooperation and Development (OECD).

Progress on a deal has been elusive, however, and in June, US Treasury Secretary Steven Mnuchin called off the talks, which were being pursued by 137 countries with a target of securing an accord by the end of 2020. In October, the OECD acknowledged that no deal was likely before 2021, largely because of US opposition to the proposals.

"We suspended the collection of this tax so that the OECD talks could finish," French finance Minister Bruno le Maire said in October.


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