Following the agreement between France and the United States on a “common global framework” to avoid American sanctions in retaliation for the French ‘GAFA’ tax (see EUROPE 12409/15), Paris and Washington announced an agreement on “the basis for work at the OECD on digital taxation” in Davos on Thursday 23 January.
“This work base should allow us to get to work at the technical level to look at the different options on the taxation of digital activities as early as next week. So we have a few months to find this agreement”, French Finance Minister Bruno Le Maire told the press after his meeting with his American counterpart, Steven Mnuchin.
The day before, Paris had indeed agreed to take an important step towards Washington by ultimately proposing to postpone to December 2020 the payment of the instalments due in April on the digital tax in France. In return, Washington undertook not to impose trade sanctions against France during the same period. Both countries also committed to use this extra negotiating time to move towards an international solution at the OECD.
The US Trade Representative (USTR) is expected to issue a statement shortly suspending the Section 301 investigation into France’s digital business tax (see EUROPE 12385/7, 12382/20), he said. At the time of going to press, however, the announcement had not yet been made.
The broad outlines of this working basis have been formalised in a document that includes several options on the table, which must again be examined to see which is the most effective, he said, without going into the details of the negotiations.
Bruno Le Maire also confirmed that the American proposal from giving businesses the choice of whether or not to apply the new system set by the OECD was off the table. “The term option no longer appears – it used to – in the OECD’s working base, simply because it is not credible”, he said.
According to several media present on site, Steven Mnuchin continued to talk about ‘Safe Harbour’, but in effect, no longer about an optional system.
France and the United States have also agreed on the fact “that it is a package and that we will only agree on minimum taxation if there is also an agreement on digital taxation”, said Bruno Le Maire.
The French minister, who considers this new agreement to be “good news”, nevertheless remains “lucid” as to the difficulties in the OECD negotiations on both digital taxation (Pillar I) and minimum taxation (Pillar II), to which China in particular is opposed.
MEPs get involved
Ahead of the tense negotiations between Paris and Washington in Davos, MEP Paul Tang (S&D, the Netherlands), backed by 135 MEPs, took the initiative to write to members of the US Congress asking them to push the Trump administration to take a “constructive stance” in the OECD negotiations “to re-establish a well-functioning tax system”.
MEPs also call on them to raise their voices against threats of US trade sanctions against European countries that have taken national measures on digital taxation. “Threats to impose tariffs in response to such measures should be condemned by both our institutions”, they write.
“If we let Trump bully individual countries, we can forget about an international deal”, said Paul Tang in a statement.
MEPs also annexed to their letter of 22 January the resolution calling for an ambitious reform of international taxation at the OECD (see EUROPE 12393/8).
See the letter: http://bit.ly/3aBPdFJ (Original version in French by Marion Fontana with Hermine Donceel)