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US sanctions on French digital tax 'incomprehensible': minister

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French Economy Minister Bruno Le Maire said on Wednesday it would be "incomprehensible" for the United States to slap sanctions on France in retaliation for a digital tax on big internet companies.

[PARIS] French Economy Minister Bruno Le Maire said on Wednesday it would be "incomprehensible" for the United States to slap sanctions on France in retaliation for a digital tax on big internet companies.

Mr Le Maire told AFP that the OECD group of wealthy democracies was finalising a way to tax global revenues of digital giants, many of which are based in the United States, at which point France would rescind its own tax.

"It would be incomprehensible for the United States to engage in a logic of sanctions and trade wars while we are close to an excellent agreement at the OECD on digital taxation," the minister said.

He spoke shortly after the United States Trade Representative said in Washington that it would issue a report on Monday and "announce any proposed action" following an investigation of France's Digital Services Tax.

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"I spoke yesterday with Treasury Secretary Steven Mnuchin who assured me there was no suggestion of immediate sanctions," Mr Le Maire said.

However the French minister acknowledged that sanctions remained possible, with products like French wines likely to be targeted.

The French digital tax applies to internet giants and is based not on profits which are reported in countries were they are subject to low taxes, but on actual sales in France.

Many governments are under pressure to address public anger over tech multinationals exploiting global tax rules that date back to the 1920s to pay only cursory taxes on their profits.

The Paris-based Organisation for Economic Co-operation and Development is leading the talks to reach an accord next year, and has published suggestions to bridge gaps between three competing plans.

France in particular has railed against EU rules that let US heavyweights like Google, Apple, Facebook and Amazon declare earnings from across the bloc in low-tax havens like Ireland or Luxembourg.

This year Paris imposed its own tax on digital giants, drawing the ire of US President Donald Trump even though France has vowed to scrub the levy once a global accord is in place.

France backs a proposal for a minimum global tax of 12.5 per cent, Mr Le Maire said Tuesday.

"The latest OECD proposition is an excellent compromise for us," he reiterated to AFP, adding that several other countries supported that level as well.

"All it would take is for the United States to support this proposition which takes into account all US observations, for the problem to be solved and for us to have a strong, fair international solution to taxing digital activities," the minister said.

AFP