U.S. Retaliation Still Looms in French Digital Tax Talks

U.S. Retaliation Still Looms in French Digital Tax Talks

access_time2019-10-17 15:15:44

President Donald Trump’s administration still might double U.S. taxes on French taxpayers and companies—even as negotiators work towards a broader international solution.

A short negotiation window over France’s plan to tax digital companies such as Facebook Inc. and Alphabet Inc., combined with tension over Trump’s use of tariffs, has those tracking the issue concerned it could escalate. Trade and tax experts also worry that proliferation of digital taxes around the world could drag on the global economy, becoming the internet equivalent of tariffs.

“Right now I don’t think there’s much optimism about an outcome, certainly within the timeframe given,” said a former administration official briefed recently on the status of negotiations.

Treasury Secretary Steven Mnuchin told reporters in early September that if the U.S. and France don’t reach an agreement within a 90-day period, then the administration would consider its options under its ongoing Section 301 investigation. And although French President Emmanuel Macron has suggested there is an agreement with the U.S., it’s not clear that U.S. officials will allow the country to roll out its digital services tax without retaliation. Section 301 of the Trade Act authorizes the president to take action, including retaliation, against another country’s policy if it violates an international trade agreement or restricts U.S. commerce.

Congressional and private sector staff briefed by the Treasury Department in recent weeks told Bloomberg Tax that opinions on retaliation remain split within the department, but that few are optimistic a deal will be in place in time—the 90-day deadline expires in mid-December, and France is aiming to implement its tax in November.

The administration and business groups hope to relieve tension through negotiations at the Organization for Economic Cooperation and Development. The OECD released a plan to rework international tax rules on Oct. 9, and will publish an update on its global minimum tax efforts in November.


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