Mon. Jul 6th, 2020

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France, US set two-week target for resolving digital tax spat

3 min read

By Sudip Kar-Gupta and Benoit Van Overstraeten

PARIS (Reuters) – France and the United States have given themselves two weeks to try to resolve a row over a French digital tax, French Finance Minister Bruno Le Maire said on Tuesday, emphasising that Paris has the European Union’s backing on the issue.

Washington has threatened to impose duties of up to 100% on imports of champagne, handbags and other French products worth $2.4 billion after a U.S. government investigation found the French tax would harm American technology companies.

“I had a long talk with U.S. Treasury Secretary Steven Mnuchin. We have decided to step up efforts to try and find a compromise, within the OECD, on digital tax,” Le Maire told reporters after a meeting in Paris with EU Trade Commissioner Phil Hogan.

“We gave each other precisely 15 days, until our next meeting, which is planned on the sidelines of Davos at the end of January,” the minister said, referring to the World Economic Forum that is held in the Swiss ski resort.

France decided in July to apply a 3% levy on revenue from digital services earned in France by firms with revenues of more than 25 million euros ($28 million) in France and 750 million euros worldwide.

“This is a more general issue between the United States and Europe,” Le Maire said, stressing other EU nations were planning their own national digital taxes. He said any international agreement on digital taxation would immediately supersede the French tax.

“Do we want a deal on the digital tax within the OECD or are we bracing ourselves for a confrontational mode which won’t be a conflict between France and the United States but a trade conflict between the European Union, a lot of European states, and the United States?”

Le Maire said he hoped there would be no U.S. sanctions during the two-week window convened with Mnuchin, adding that any decision by Washington to take action would in effect bring an end to the discussions.

On his first official visit to Paris as new EU Trade Commissioner, Phil Hogan said the European Commission “will stand by France” in its digital tax dispute with Washington.

He also said he had discussed trade with China and reform of the World Trade Organization (WTO) with Le Maire, and that he plans to meet his U.S. counterpart in Washington to try to find common ground on these topics.

“We want to see a reform of the WTO and we share the U.S. analysis on this,” Hogan said.

Last month, Washington reaffirmed its commitment to the WTO but called for longstanding concerns with the trade body’s appellate court to be addressed.

“A WTO reform is one of France’s top priorities. Because it’s better to solve trade issues within a multilateral body than in a bilateral way,” Le Maire said.

“France is ready to support all efforts allowing a jump-start of WTO reform negotiations and the solving of the problems affecting its dispute settlement body.”

($1 = 0.8941 euros)

(Reporting by Benoit Van Overstraeten and Sudip Kar-Gupta; Editing by Richard Lough and Catherine Evans)

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