By Julie Martin, MNE Tax
French President Emmanuel Macron today confirmed that the US and France have reached a compromise agreement which requires France to refund all digital services tax (DST) paid by multinationals once a new international system for taxing multinationals in the digital sector is in place.
“The day international tax exists on digital services, France will do away with its national tax and everything that has already been paid under the French tax system will be reimbursed,” Macron said at a joint press conference with US President Donald Trump at the close of the G7 summit in Biarritz, France.
US officials have charged that the DST, which imposes a 3% tax on the revenue of large tech companies, unfairly targets US multinationals given that many of the world’s largest MNEs are headquartered in the US.
In July, the US launched a probe into the French tax under Section 301 of the Trade Act of 1974 which gives the President broad powers to investigate and respond to a foreign country’s unfair trade practices and take appropriate action, including retaliating if needed.
President Donald Trump had even suggested that the US might retaliate for France’s imposition of a DST by imposing a tariff on French wine.
According to Macron, though, the US and France have now reached a “very good agreement.”
Macron said France is among of 10 EU countries, including Italy and the UK, that are “getting ready to do something on a national level” about the inequities in the current international tax system which allow large multinational players to pay no tax and thus compete unfairly. “This is an injustice that destroys jobs,” Macron said.
Macron said the objective of France’s DST is not to tax multinationals of a particular country. Rather, he said that the aim has always been to reach international agreement at the OECD level.
Countries are aiming to reach agreement on a revised international tax system by the end of 2020. In fact, following the G7 meeting, the leaders again pledged to reach agreement by that deadline.
“The G7 commits to reaching in 2020 an agreement to simplify regulatory barriers and modernize international taxation within the framework of the OECD,” the G7g leaders said in a declaration delivered after their meeting.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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