US and France set Davos deadline to resolve digital tax spat

France and the United States have given themselves two weeks to try to resolve a row over a French digital tax, French Finance Minister Bruno Le Maire said on Tuesday, emphasising that Paris has the European Union’s backing on the issue.

Washington has threatened to impose duties of up to 100 percent on imports of champagne, handbags and other French products worth $2.4bn after a US government investigation found the French tax would harm US technology companies.

“I had a long talk with US Treasury Secretary Steven Mnuchin. We have decided to step up efforts to try and find a compromise, within the OECD [Organisation for Economic Co-operation and Development], on digital tax,” Le Maire told reporters after a meeting in Paris with EU Trade Commissioner Phil Hogan.

“We gave each other precisely 15 days, until our next meeting, which is planned on the sidelines of Davos at the end of January,” the minister said, referring to the World Economic Forum that is held annually in the Swiss ski resort.

France decided in July to apply a three percent levy on revenue from digital services earned in France by firms with revenues of more than 25 million euros ($28m) in France and 750 million euros ($836m) worldwide.

“This is a more general issue between the United States and Europe,” Le Maire said, stressing that other EU nations were planning their own national digital taxes. He said any international agreement on digital taxation would immediately supersede the French tax.

“Do we want a deal on the digital tax within the OECD or are we bracing ourselves for a confrontational mode which won’t be a conflict between France and the United States but a trade conflict between the European Union, a lot of European states, and the United States?”

Le Maire said he hoped there would be no US sanctions during the two-week window convened with Mnuchin, adding that any decision by Washington to take action would in effect bring an end to the discussions.

On his first official visit to Paris as the new EU Trade Commissioner, Phil Hogan said the European Commission “will stand by France” in its digital tax dispute with Washington.

He also said he had discussed trade with China and reform of the World Trade Organization (WTO) with Le Maire, and that he plans to meet his US counterpart in Washington to try to find common ground on these topics.

“We want to see a reform of the WTO and we share the US analysis on this,” Hogan said.

Last month, Washington reaffirmed its commitment to the WTO but called for long-standing concerns with the trade body’s appellate court to be addressed.

“A WTO reform is one of France’s top priorities. Because it’s better to solve trade issues within a multilateral body than in a bilateral way,” Le Maire said.

“France is ready to support all efforts allowing a jump start of WTO reform negotiations and the solving of the problems affecting its dispute settlement body.”