French President Emmanuel Macron on Aug. 26 claimed that the U.S. and France reached a deal regarding France’s digital tax framework, after the Office of the U.S. Trade Representative started a Section 301 investigation on the matter in July.
Section 301 of the Trade Act of 1974 provides for the imposition of trade remedies, including tariffs, if the U.S. finds that other countries are engaging in unfair trade practices.
Macron delivered the statement during a press conference alongside President Donald Trump on the final day of the G7 summit in Biarritz, France.
But when asked whether the U.S. and France had reached an agreement on digital taxation, Trump stopped short of confirming that any such deal was sealed.
He was responding to a reporter’s two-part question during the press conference about whether Trump would follow through on a threat he made Aug. 25 to impose tariffs on French wine and whether he could confirm that the U.S. and France reached an agreement on digital taxation.
“I can confirm that the first lady loved your French wine, OK?” Trump said, according to a White House transcript of the press conference. “All right? She loved your French wine. So thank you very much. That’s fine.”
France will do away with its national digital services tax when an international tax is imposed on digital services, at which point everything paid under the French tax system will be reimbursed, Macron said, according to his transcribed remarks, which were translated into English.
“The aim, ultimately, is to find an agreement internationally by 2020 to revamp international tax systems within the framework of the OECD [Organization for Economic Cooperation and Development] to combat harmful trade practices, which are also harmful to the U.S. economy,” Macron said.
The French in July signed into law a 3% tax that applies to firms with annual global revenues from digital services of at least 750 million euros and annual revenues from France of at least 25 million euros. The tax is set to take effect in November, unless France agrees to adopt another digital tax framework.
National Foreign Trade Council Vice President for Tax Policy Catherine Schultz said it’s not likely the U.S. will impose tariffs on France while any negotiations at the OECD are ongoing.
It’s possible that “if the French don’t negotiate in good faith at the OECD, [USTR will] begin to impose them,” she said. “If the OECD could come up with a deal this fall, then it looks like we won’t be imposing tariffs.”
Members of the OECD — an intergovernmental group of 36 of the world’s richest nations — would seek to strike a digital taxation deal in September, so a final product can be developed before October’s G20 meetings, Schultz said.
The meetings will take place in Okayama, Japan, and will include ministerial meetings on trade and digital economy, as well as finance and central banking.
Schultz said that USTR’s Section 301 investigation will likely continue at least until then.
“They’re not going to stop 301, but they’re not going to impose anything to that effect until it looks like the OECD process doesn’t work,” she said.
