France and US seek compromise on digital tax in 15 days

French telecom companies SFR and Bouygues Telecom, which already use Huawei in their 4G networks, have filed applications with the National Agency for the Security of Information Systems (Anssi) to use Huawei's 5G services again. [EPA-EFE/IAN LANGSDON]

France and the US will try to settle their dispute over the French digital tax within 15 days to avoid further tariffs, French Finance minister Bruno Le Maire said on Tuesday (7 January).

Speaking alongside Le Maire, commissioner for Trade Phil Hogan said that the EU “will look at all possibilities” if Washington finally decides to impose 100% duties on French exports such as luxury goods and wines, worth $2.4 billion, as a response to the digital tax. “The European Commission will stand together with France”, Hogan said.

We will ‘react as one’, EU tells US over French digital tax dispute

The European Commission wants to settle the latest trade dispute with the US over the French digital tax “amicably”, but warned that the bloc will “react as one” if Washington slaps tariffs on Paris.

Part of the European response could include counter-tariffs affecting US goods for a similar value. Le Maire told reporters that he had a “long” phone conversation on Monday with US Treasury Secretary, Steve Mnuchin.

Both sides agreed to try to find a compromise by the next time they are scheduled to meet just over a fortnight on the sidelines of the World Economic Forum in Davos, Switzerland.

OECD proposal

The basis for the agreement would be the proposal drafted by Organization for Economic Cooperation and Development (OECD) for an international digital tax, described by Le Maire as “good, fair and balanced”.

But the US has responded coldly to the OECD initiative, believing that the plans could discriminate against US firms.

“We have agreed to redouble our efforts in the coming days to try to find a compromise on digital taxation within the framework of the OECD,” Le Maire explained.

Hogan will travel next week (14-16 January) to the US, where he will meet with US trade representative Robert Lighthizer. In addition to the digital tax, Hogan will discuss with his US counterpart the reform of the World Trade Organisation, seriously damaged after its Appellate Body ceased to function following the US blocking of the nomination of new members.

EU to strengthen trade sanctions as WTO paralysis starts

As the international system for settling trade disputes is set to become crippled on Tuesday (10 December), Europe will in the coming days propose ways to bolster its sanction toolbox against countries that adopt ilegal trade measures and block the renewal of WTO’s appellate body.

Hogan reaffirmed the EU’s “openness” to discuss the WTO reform and other trade issues because “we believe that dialogue and consultation is better than confrontation”.

Le Maire also suggested that Hogan organize a conference in Paris to “relaunch the discussions” on the WTO reform, the minister revealed.

Meanwhile, the US Administration is nearing the end of the preparatory phase for the fresh tariffs against France. A public session was scheduled for Tuesday to examine requests for exemptions from the new tariffs, after it launched a public consultation last month on the new duties.

Le Maire hoped that the US would not approve the new duties during the 15-day negotiation period agreed with Mnuchin.

Trump orders French digital tax probe, amid talk of retaliatory tariffs

US President Donald Trump has ordered an investigation into France’s digital tax plans, which may result in retaliatory tariffs or trade restrictions, should the outcome of the probe identify unfair or discriminatory practices.  

The French minister insisted once again that the national digital tax is not “discriminatory” and it does not target any one company or state.

Last July, France adopted a 3% tax that applies to firms with global revenues above €750 million yearly generated from digital activities, of which €25 million are made in its territory.

Around 30 companies would be affected, including Google, Facebook or Amazon, but also other European and Chinese firms.

Le Maire said that the preferred option is to reach an agreement on the basis of the OECD proposal, but otherwise they will work together with the European partners on other options.

France had said that it is ready to withdraw its national tax as soon as there is an agreement on the OECD proposal.

If the international efforts fail, the European Commission said it will revive a European version by the end of this year.

Edited by Samuel Stolton

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