During a new briefing at the Group of 7 summit, French President Emmanuel Macron announced that U.S. President Donald Trump and Macron have agreed on a compromise regarding the controversial tax on tech giants.
France is still going to tax big tech companies. But the French government promises that it’ll scrap the French tax as soon as the OECD finds a way to properly tax tech companies in countries where they operate.
The OECD has been working on a way to properly tax tech companies with a standardized set of rules for a few years. According to recent announcements, this new framework could be released in 2020.
In addition to ending the French tax, as Le Monde outlined, France promises that it’ll pay back companies that overpaid before the OECD framework. For instance, if Facebook pays a lot of taxes in 2019 due to the French tax on tech giants and if they would have paid less under the OECD framework, France will pay back the difference.
“There’s been a lot of anxiety because of misunderstandings on this French digital tax. We talked about it, and I think we have found a very good deal thanks to the work of ministers,” Macron said.
“On a bilateral basis, we have reached an agreement to fix our disagreements between us. We are going to work together to find a solution. When there’s an international taxation model, we will remove the tax — and everything that has been paid will be deducted from this international tax. We have found an agreement that is good for all parties involved. It can solve a lot of really negative issues and improve the international system.”
On July 26, Trump criticized France’s plans in a tweet. “France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA,” he wrote. “We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”
Right before leaving for the Group of 7 summit, Trump reiterated criticism of the French tax and said the U.S. would be placing tariffs on French wines.
At the Group of 7 summit, Trump didn’t want to confirm that the U.S. and France had reached an agreement. As CNN reported, when a reporter asked a question about France’s tax on tech companies, Trump said: “I can confirm that the first lady loved your French wine. She loved your French wine. So thank you very much. That’s fine.”
A couple of months ago, the French parliament voted in favor of a new tax on tech giants. In order to avoid tax optimization schemes, big tech companies that generate significant revenue in France are taxed on their revenue generated in France.
France’s Economy Minister Bruno Le Maire first lobbied other European countries to create that new tax at the European level. It made a ton of sense as the main issue is that big tech companies create complicated European corporate structures in order to lower their effective tax rate.
But Le Maire couldn’t get a unanimous vote and created a tax for France in particular. If you’re running a company that generates more than €750 million in global revenue and €25 million in France, you have to pay 3 percent of your French revenue in taxes.
This tax is specifically designed for tech companies in two categories — marketplace (Amazon’s marketplace, Uber, Airbnb…) and advertising (Facebook, Google, Criteo…). While it isn’t designed to target American companies, the vast majority of big tech companies that operate in France are American.