WASHINGTON, D.C. (January 6, 2021)—-today France will require big tech companies to pay its digital services tax, a move that is likely to trigger retaliation by President Donald Trump and pitch the incoming US administration into another trade fight.
The digital services 3% tax on revenue from digital services in the country was introduced in 2019. But the French government suspended collections while negotiations on a broader overhaul of the global tax system played out at the Organization for Economic Cooperation and Development. Those talks have not produced a breakthrough.
“Companies received the tax notice for this year,” the finance ministry said in a statement. Google (GOOGL), Facebook (FB) and Amazon (AMZN) are among the US tech firms that will have to pay the tax, which applies to companies with global revenue of more than €750 million ($894 million).
The move sets the stage for a transatlantic clash just before Trump leaves office.
His administration — which withdrew from the OECD talks in June — pledged to retaliate if France moved ahead with the tax, and it could slap retaliatory tariffs on $1.3 billion in French goods, including handbags and cosmetics, as soon as Jan. 6.
President Trump and French President Emmanuel Macron agreed to the truce after Paris offered to suspend down payments for last year’s digital tax and Washington promised to keep negotiating towards a solution rather than acting on a tariff threat, French sources said. Trump had previously opposed such digital services taxes, which target US companies.
French finance minister Bruno Le Maire said earlier this week that he hopes to work with the next administration to re-engage with the OECD process so an agreement can be reached. The French government had consistently said the taxes would come back into effect in December in the absence of a deal, he added.
Historically, companies have been required to pay taxes on income in France where they book their profits. But European countries argue they should also be able to collect–digital services taxes, given that these companies make big profits off sales in the region. Similar taxes are in place in the United Kingdom, Italy and Austria.
Source:AP wrote the original article.