France Uses Davos to Pursue Global 'Digital Tax' Goal

Paris and Washington failed to agree on Wednesday on how to push forward on a digital tax deal.

By Reuters | Updated: 23 January 2020 17:38 IST

France Uses Davos to Pursue Global 'Digital Tax' Goal

France's existing digital tax is based on turnover

Highlights

France is optimistic of reaching a deal on a global tax
We are moving in the right direction, French Finance Minister said
US President Trump and French President Macron discussed the issue

French Finance Minister Bruno Le Maire is optimistic of reaching a deal on a global tax on digital companies, despite an initial failure to agree one with the United States.

"We are moving in the right direction," Le Maire told Reuters TV at the World Economic Forum in the Swiss ski resort of Davos on Thursday, adding that he thought France was close to striking an agreement with the United States.

US President Donald Trump and French President Emmanuel Macron discussed the issue in a phone call on Sunday, with both sides sounding positive afterwards, in contrast to the threats the US has made to impose tariffs on exports of champagne and other luxury goods in retaliation for a French digital tax.

But Paris and Washington failed to agree on Wednesday on how to push forward on a deal that involves a rewriting of decades-old cross-border tax rules. They did, however, agree to set aside their squabbling as they work on the global initiative.

This is being led by the Organisation for Economic Cooperation and Development (OECD), a Paris-based club of wealthier economies.

OECD Secretary-General Angel Gurria has been working for years on finding ways to create a level playing field on digital taxation, but those efforts are now being accelerated to see if an agreement can be reached by December.

Speaking on a panel at the World Economic Forum with Le Maire, Gurria said he was hopeful of having a framework that would apply to more than 130 countries drafted by July. "We have no Plan B -- we just have to get it done," he said.

Le Maire has thrust France front and centre of the digital taxation debate, despite the fact several countries, including Italy and Britain, are already pursuing or imposing their own national digital-tax regimes.

"It would be far better to have an international framework for everybody," Le Maire said on Thursday, adding that otherwise the world would end up with a cacophony of national systems that would compound the problem.

"So we have to build something different and that's exactly what we want to do during 2020, by building on the extremely good work being done (at the OECD)."

France's existing digital tax is based on turnover. But Le Maire admitted that was not optimal from an economic point of view, saying the OECD's plan to tax profits was more sound.

There will be intense discussion over what level of profit would be taxed and how it would be collected.

"Everything is on the table," Le Maire said.

"We just have to decide if we want to avoid a loophole in the international taxation system or have many national solutions that would be detrimental to all of us.

"We just can't go on any longer with a taxation system in which the richest companies, those that are making the biggest profits, are paying the least tax."

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