France to apply digital tax this year whether US returns to negotiations or not

[PARIS] France will apply taxes on digital services this year whether the United States returns to negotiations on the issue or not, Finance Minister Bruno Le Maire said on Thursday, calling a decision by Washington to pull out of talks a "provocation".

The United States announced on Wednesday it was withdrawing from negotiations with European countries over new global tax rules on digital companies, saying the talks had failed to make any progress.

France, one of several European countries which has enacted new taxes to collect more revenue from digital companies, had agreed to suspend collection of its levy while negotiations were under way at the Organisation for Economic Cooperation and Development (OECD) on a global approach.

Mr Le Maire said France, Britain, Italy and Spain had jointly responded on Thursday to a letter from US Treasury Secretary Steven Mnuchin announcing the pullout. They said they wanted a deal at the OECD as soon as possible.

"This letter is a provocation. It's a provocation towards all the partners at the OECD when we were centimetres away from a deal on the taxation of digital giants," Mr Le Maire said on France Inter radio of Mr Mnuchin's letter.

The European countries argue that tech firms pay too little tax in the countries where they do business, because they are able to shift their profits around the globe with little physical infrastructure. The United States has resisted any new unilateral taxes on its Silicon Valley companies in the absence of an OECD deal.

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Mr Le Maire said that whether the United States returned to the negotiating table to reach a deal at the OECD or not, France would apply its digital services tax this year. Washington has threatened to retaliate with tariffs.

The United States opened investigations this month into digital taxes in Britain, Italy and Spain over concerns that they unfairly target US companies.

A spokesperson for Britain's Treasury said London remained committed to finding a global solution.

Nearly 140 countries have been negotiating the first rewrite of international tax rules in a generation in order to bring them up to date for the digital age. The aim is to reach an agreement before the end of the year, although the coronavirus outbreak has slowed progress.

REUTERS