France And US Near Digital Tax Compromise

By Global Tax Weekly

French Finance Minister Bruno Le Maire has revealed that France and the United States would be attempting this month to reach a compromise over their ongoing dispute regarding France’s new digital services tax (DST).

The French DST is a three percent tax on the revenue of digital companies providing advertising services, selling user data for advertising purposes, or performing intermediation services. Companies with global revenues of EUR750m (USD838m) or more and French sales of at least EUR25m are required to pay the tax.

The US argues that the tax unfairly discriminates against US-based companies and is currently threatening to retaliate against the measure, imposing additional duties of 100 percent on certain French imports with a trade value of USD2.4bn.

Addressing a press conference alongside the European Commissioner for Trade, Phil Hogan, Le Maire said that France and the US have agreed to “redouble our efforts in the coming days to try to find a compromise on digital taxation within the framework of the OECD.”

Le Maire is hopeful that such a compromise can be reached by the time he is due to meet with US Treasury Secretary Steven Mnuchin at the World Economic Forum in Switzerland, which is due to start on January 21, 2020.

However, Hogan said, should the two governments fail to reach an agreement, the EU will consider countermeasures to any additional duties imposed on French products.

Going almost immediately back on the offensive, on January 6, a decree was published in the French Official Journal to modify the list of non-cooperative states and territories in tax matters.

The following jurisdictions have been added to the list because they do not have adequate tax information exchange procedures in place with France: Anguilla, the Bahamas, the British Virgin Islands, and Seychelles.

Another set of territories which have been added to the list because they do not meet at least one of the criteria set out in Annex V of the European Council conclusions of December 5, 2017, setting out the EU list of non-cooperative jurisdictions for tax purposes include American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, and the US Virgin Islands.

Vanuatu has been added to the list because it does not comply with the criterion, defined in Annex V, on Council conclusions relating to states or territories facilitating the creation of extraterritorial structures or arrangements intended to attract profits which do not reflect real economic activity in the jurisdiction.

Finally, Botswana, Brunei, Guatemala, the Marshall Islands, Nauru, and Niue have been removed from the list completely in this round of updates.

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