France and the United States have given themselves until the end of the month to settle a dispute over the taxation of digital companies. Finance Minister Bruno Le Maire is due to meet U.S. Treasury Secretary Steven Mnuchin and United States trade representative Robert Lighthizer on the sidelines of the World Economic Forum in Davos, Switzerland, at the end of January. Mr. Le Maire said he and Mr. Mnuchin would redouble their efforts to find a compromise before that meeting.
The current conflict between Washington and Paris is over a French decision to impose a 3 percent tax on sales generated by tech firms. France, along with a handful of other countries, has been frustrated by platforms like Google, Facebook and Amazon conducting a lot of commerce in their country, while paying few taxes because they have little physical presence there. In July, France passed a 3 percent tax on the revenue companies earn from providing digital services to French users. The levy is applicable to firms with more 750 million euros in global revenue, and 25 million euros in revenue in France.
The tax has angered the Trump administration, which has said the way the tax is structured unfairly targets dominant American internet companies, while sparing French firms. The United States has threatened to propose a range of retaliatory levies of up to 100 percent on French goods under Section 301 of the 1974 Trade Act, which allows USTR to take unilateral action against unfair trade barriers. The U.S. tariffs could target $2.4 billion of French products, including key imports such as cheese, wine, and luxury handbags.
International negotiators have been trying to develop a broader framework for digital taxes through the Organization for Economic Cooperation and Development (O.E.C.D.). However, the slow pace of the negotiations has frustrated European officials. The French government has said that it will revoke its digital tax once there is an agreement at an international level. If no deal is struck at the O.E.C.D. and American tariffs are imposed, France has vowed to retaliate with its own levies.