G7: US and France strike compromise over taxing tech giants

France will refund any taxes paid to it above a threshold set to be instated by OECD nations.

    The US had originally objected to other nations taxing huge social media companies [Dado Ruvic/Illustration/Reuters]
    The US had originally objected to other nations taxing huge social media companies [Dado Ruvic/Illustration/Reuters]

    French and US negotiators have reached a compromise agreement on France's digital tax, a levy which prompted US President Donald Trump to threaten a separate tax on French wine imports, a source close to the negotiations said on Monday morning.

    The compromise struck between French Finance Minister Bruno Le Maire, US Treasury Secretary Steven Mnuchin and Donald Trump's White House economic adviser Larry Kudlow envisages that France would repay to companies the difference between a French tax and a planned mechanism being drawn up by the OECD .

    The draft agreement will be submitted to Trump and French President Emmanuel Macron later on Monday at a G7 leaders summit.

    "Trump's adviser is OK with the proposal," the source told Reuters. "That would be the mechanism at this stage, that's the joint proposal."

    German Chancellor Angela Merkel said the OECD countries wanted a solution on digital taxation by 2020.

    In July, the French Senate approved a three percent levy that will apply to revenue from digital services earned in France by firms with more than 25 million euros ($28m) in French revenue and 750 million euros ($836m) worldwide.

    Other EU countries including AustriaBritainSpain and Italy have also announced plans for their digital taxes.

    They say a levy is needed because big multinational internet companies such as Facebookand Amazon are currently able to book profits in low-tax countries such as Ireland, no matter where the revenue originates.

    Political pressure to respond has been growing as local retailers online and in brick-and-mortar stores have been put at a disadvantage.

    SOURCE: News agencies