France Rejects US Offer To Make International Tax Reform Plans Optional

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

Le Maire urged the United States to negotiate “in good faith”
with fellow 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 Organization for Economic
Cooperation and Development, 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 harbor 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 three-percent tax on sales by digital giants within
France.

– ‘In good faith’ –
Le Maire urged Washington to “return to the path of negotiations …
in good faith, not on an optional basis but on a binding basis for
all states that sign up to the agreement.”

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 percent on $2.4 billion
in French goods including champagne, cosmetics, yoghurt and
Roquefort cheese.

In his letter, Mnuchin underscored the importance of the OECD
talks “to prevent the proliferation of unilateral measures, like
digital services taxes” that he urged member countries to
suspend.

The row now threatens to block the OECD negotiations.

“It is regrettable that these trade wars lead our US allies and
friends … to directly attack products that symbolise the French
culture,” Le Maire said.

He said the French tax did not single out US companies, and that
European Trade Commissioner Phil Hogan had expressed his “full
support” for a EU-wide plan that would reply to the US threat in
kind should it take effect.

Meanwhile Hogan said he was planning to sit down with US Trade
Representative Robert Lighthizer next month to discuss the American
threat against French exports.

“We are looking at all possibilities, but we prefer to have a
negotiated settlement,” Hogan told Bloomberg News.

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