EXPLAINER-Macron's quest for an international tax on digital services




  • In US
  • 2019-12-03 12:57:32Z
  • By Reuters

By Richard Lough

PARIS, Dec 3 (Reuters) - The United States has threatened punitive duties of up to 100% on $2.4 billion in imports from France of champagne, handbags, cheese and other products, after concluding that France's new digital services tax would harm U.S. technology companies.

French President Emmanuel Macron pressed ahead with the digital tax in the summer, defying U.S. anger at a levy Washington says unfairly targets American companies.

The French leader is keen to reach an international agreement on taxing big tech companies and has urged the Trump administration to help reform global corporate taxes.

Here is a guide to the digital tax debate.


WHAT IS A DIGITAL TAX?

The governments of a growing number of countries have been vexed by their inability to tax profits of multinational tech companies that they believe are derived in their jurisdictions.

Internet giants such as Facebook, Alphabet Inc.'s Google and Amazon are currently able to book profits in low-tax countries like Ireland and Luxembourg, no matter where the revenue originates.

Macron says taxing big tech more is a matter of social justice.

The French leader pushed hard for a digital tax to cover European Union member states, but ran up against resistance from Ireland, Denmark, Sweden and Finland.


WHAT HAS FRANCE DONE?

After talks on an EU digital tax foundered, Macron's government imposed its own unilateral tax in July. It applied retroactively to Jan. 1, 2019.

The 3% levy applies to revenue from digital services earned by firms with more than 25 million euros in revenue from France and 750 million euros ($826.65 million) worldwide.

Paris is not alone among European capitals in proposing a tax on big tech. Britain, Spain, Italy, Austria, Mexico and Canada have also announced plans for their own digital levies.


WHAT DOES MACRON WANT TO ACHIEVE?

Macron's goal is to secure a broader agreement on digital taxation under the auspices of the Organisation for Economic Cooperation and Development (OECD).

At a G20 meeting in June, finance ministers agreed to compile common rules to close tax loopholes and promised to "redouble efforts" for a consensus-based solution to be found by 2020. The following month, G7 finance ministers agreed there should be a minimum level of tax to discourage countries from competing in a "race to the bottom".

Washington originally pushed for the new international tax system to cover a wide range of companies but officials say it has got cold feet in recent months after being lobbied by traditional companies that realised they would be hit too.


WHAT OBSTACLES LIE IN THE WAY?

Trump. The U.S. president has already lambasted Macron's "foolishness" for pursuing a French digital levy.

Digital taxation has opened up a new front in the trade spat between Washington and the EU as economic relations between the two appear to sour.

French Finance Minister Bruno Le Maire says Paris would drop the French digital tax as soon as an agreement is found at the OECD to overhaul decades-old international tax rules.

"If the U.S. do the same, then it's the end of the issue," Le Maire said on Tuesday.

Low-tax jurisdictions also have misgivings about Macron's tax plan because it would make it harder for them to attract foreign direct investment with the promise of ultra-low corporate taxes. ($1 = 0.9073 euros) (Reporting by Richard Lough; Editing by Leigh Thomas and Catherine Evans)

COMMENTS

More Related News

Trump Blasts Trudeau and
Trump Blasts Trudeau and 'Pain in the Ass' Macron Behind Closed Doors Following Viral Video
  • World
  • 2019-12-12 01:50:55Z

In the days following the release of a viral video showing world leaders at the NATO meeting in London making fun of him, Donald Trump shot back at his counterparts. The famously sensitive American president lashed out during a closed-door meeting at the White House with more than a dozen ambassadors to the United Nations present, according to three sources with knowledge of the gathering.In doing so, he made a number of foreign officials noticeably on-edge and also upended a portion of the meeting meant to focus on world powers' security cooperation, not personal gripes.During this private airing of grievances, President Trump repeatedly denigrated the Canadian prime minister behind his...

US calls UN meeting on North Korea missiles _ not rights
US calls UN meeting on North Korea missiles _ not rights
  • World
  • 2019-12-11 18:28:09Z

The Security Council on Wednesday was meeting for the second time in a week on North Korea's increasing ballistic missile and nuclear-related activities, this time at the request of the United States, which effectively blocked a council discussion on the North's dismal human rights situation. Stephen Biegun, the Trump administration's special representative for North Korea, was scheduled to address Wednesday afternoon's open council meeting. It was taking place less than three weeks before North Korean leader Kim Jong Un's end-of-December deadline for the U.S. to come up with new proposals to revive nuclear diplomacy.

Lawmakers green light US space force
Lawmakers green light US space force

The United States is getting a new space force along with $738 billion in military spending under an agreement backed by lawmakers on Tuesday that fulfils a priority of President Donald Trump. The 2020 spending in the National Defense Authorization Act is a jump from the $716 billion authorized last

Iran foreign ministry issues travel advisory for citizens not to visit America
Iran foreign ministry issues travel advisory for citizens not to visit America

Iran warned its citizens, particularly scientists, on Tuesday not to visit America, saying Iranians there were subjected to arbitrary and lengthy detention in inhuman conditions. "Iranian citizens, particularly elites and scientists, are requested to seriously avoid traveling to America, even to take part in scientific conferences and even having an invitation," a travel advisory on the foreign ministry website said. It cited, "America's cruel and one-sided laws toward Iranians, especially Iranian elites, and arbitrary and lengthy detention in completely inhuman conditions" as reasons for the travel advisory.

'It's time:' Mexico urges Pelosi to act on North American trade deal
  • US
  • 2019-12-09 16:34:26Z

Mexican President Andres Manuel Lopez Obrador on Monday urged U.S. House of Representatives Speaker Nancy Pelosi to make a decision about the United States-Mexico-Canada Agreement, saying it was time to move forward with the trade deal. Lopez Obrador said Mexican senators accepted changes to the United States-Mexico-Canada Agreement (USMCA) presented by the government on Sunday amid an intense back-and-forth between the countries as they hammer out final changes to satisfy U.S. Democrats' demands. The president said he "respectfully requests" Pelosi to take action on the deal, which was struck more than a year ago but must be ratified by legislators in the three countries before it goes...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: US