France rejects 'optional' US digital tax proposal

French minister urges US to negotiate with OECD to reach agreement on taxing tech giants

PARIS: A US proposal for international digital taxes to be made "optional" is "not acceptable," said French Finance Minister Bruno Le Maire Friday.

Le Maire urged the United States to negotiate "in good faith" with fellow Organization for Economic Cooperation and Development (OECD) members to reach agreement on taxing global computing giants rather than resorting to "regrettable" trade measures that target symbolic products.

France has been at the forefront of efforts to tighten taxation of digital giants and parliament infuriated the administration of President Donald Trump in July by adopting a law taxing digital firms like Google, Apple, Facebook and Amazon for revenues earned inside the country.

In a letter addressed Thursday to the OECD, US Treasury Secretary Steven Mnuchin reiterated support for ongoing talks on a deal that is to be finalised by June, but also made new propositions that unsettled trade partners.

The notion of a "safe harbour regime" that Mnuchin presents as a solution to US concerns includes the principle of "optionality" which Le Maire, however, said would not work.

"Frankly, I do not believe in the US proposal for an optional solution, where companies choose freely to be taxed or not," Le Maire told an audience in Paris. "An optional solution would clearly not be acceptable to France or its OECD partners," the minister said.

"I have not seen many companies that accept to be taxed of their own free will. While you can always count on individual philanthropy, I am not sure that when it comes to public finances that goes very far," Le Maire said.

The French finance minister argued for a binding text being mulled by 135 countries under OECD auspices that would replace France's own 3% tax on sales by digital giants within France.

France and other countries argue that multinational digital giants must pay taxes on revenues accrued in a country even if their corporate or tax headquarters are elsewhere, such as Ireland or Luxembourg where company profits are taxed at comparatively low levels.

In response to the French digital tax plan, the US has threatened to impose tariffs of up to 100% on $2.4 billion in French goods. The row now threatens to block the OECD negotiations.

Published in The Express Tribune, December 7^th, 2019.

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