French economy and finance minister Bruno Le Maire, one of the main proponents of a digital tax on global internet multinationals.

AFP via Getty Images

The French government has sent notices to multinational internet companies that they should pay the country’s digital tax in December, a finance ministry spokesman said on Nov. 25. The government canceled a few weeks ago its earlier decision to suspend the collection of the controversial levy.

  • The U.S. government threatened in July to slap French imports of handbags, cosmetics and soap with 25% retaliatory tariffs if Paris went ahead with the tax, whose principle was voted last year by the country’s parliament.

  • France received payment of the tax in 2019 but then suspended it pending the success of international negotiations within the Organization for Economic Cooperation and Development on a global taxation of multinationals and internet profits. But the U.S. pulled out of these talks in June.

  • The French tax has been set at 3% of revenue derived from online advertising, the sale of personal data to third parties, and marketplace activities. It is levied on companies with revenue from these activities of more than €750 million globally and €25 million in France.

  • France isn’t the only European Union country intent on a digital tax. The U.K. has put a national version into law. The U.K. French, Spanish and Italian finance ministers signed a joint letter in August demanding that technology giants, like Google

    and Facebook
    “pay their fair share of tax.”

The outlook: The Trump administration may now choose to go ahead with the tariffs in its last two months in power, but whatever it decides or not, the situation will have to be dealt with by incoming president Joe Biden and his team.

The clear hope of European governments is that the U.S. will rejoin the OECD talks, so that an international agreement on global tax can be struck next year. This should not be too difficult: Even the companies targeted by the measure have indicated their preference for a global tax, which would spare them the compliance costs of having to deal with many different national ones.

The OECD talks had made serious progress on the technical level and were seen to be nearing a positive conclusion. With the coronavirus recession and governments strapped for cash, tax avoidance on the level used by big multinationals has become politically indefensible. A deal shouldn’t be too hard to find next year, making the current Franco-American skirmish obsolete.

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