The French Finance Minister, Bruno Le Maire, and his US counterpart, Steven Mnuchin, announced that they had agreed on a "joint global framework" on Wednesday 22 January in Davos, where the World Economic Forum was being held, in order to avoid American sanctions in retaliation for the French "GAFA" tax and to pave the way for an agreement at the OECD on the reform of international taxation by the end of 2020 (see EUROPE 12398/6).
According to the French minister, the Franco-American truce announced the day before (see EUROPE 12408/2), following a telephone conversation between the French and US presidents on Sunday evening, made it possible to "calm things down" and "work in a serene manner".
This "joint global framework", presented at a press conference, contains three commitments. First of all, Paris agreed to take an important step towards Washington by finally proposing to postpone the payment of the next instalments, due in April and November, on the digital tax in France until December 2020. In return, Washington will not impose trade sanctions on France during the same period. Finally, both countries committed to use this extra negotiating time to move towards an international solution at the OECD.
According to Bruno Le Maire, this should not be seen as any form of "surrender" to the Americans. "The alternative to this constructive compromise... is a trade war. And once a trade war is declared, it is very difficult to get out of it", he said.
"France will accept neither the withdrawal nor the suspension of its digital business tax so long as there is no international solution to replace our national tax (...) This means, in any case, that digital companies will pay their fair tax in 2020, either - which is what we want - under an international regime because we will have reached an agreement at the OECD (...), or under the national regime, if we have not agreed on an international solution", he said.
A new meeting on Thursday to define the working basis
While the meeting between the two men was certainly aimed at easing tensions around the French 'GAFA' tax, it also aimed to find common ground between the French and US positions on digital taxation (Pillar I) in the framework of the OECD negotiations.
"We still have work to do. We still need to have a clear understanding of what - and this is the most important - will be the working basis at the OECD", said the French Minister, who wants a working basis that is "solid, credible and fair".
A new meeting between Bruno Le Maire, Steven Mnuchin and OECD Secretary-General Ángel Gurría is therefore scheduled for Thursday 23 January, in order to "define precisely the working basis", he announced.
"A working basis founded, for example, on a principle of optionality would not be a credible working basis", he warned, referring to the US proposal based on the ‘Safe Harbor regime’, an approach that would leave it up to companies to choose whether or not to apply the new system set by the OECD. According to Bruno Le Maire, this proposal is no longer on the negotiating table today.
At a press conference, the French minister was rather confident that Thursday’s discussions will be successful. While he knows that the United States has an objective interest in Pillar II of the reform, namely minimum taxation, he has made it clear that, for France, any agreement at the OECD will have to cover both pillars.
If tensions have eased between France and the United States, it is now the turn of other European countries that have introduced digital taxation at national level, such as the United Kingdom and Italy, to be threatened with US trade sanctions. Washington hopes that they, too, will suspend their taxes until an international solution is found. The United Kingdom has confirmed that for the time being it intends to maintain its tax. (Original version in French by Marion Fontana)