France and the United States have reached a deal to end a standoff over a French tax on big internet companies, French President Emmanuel Macron said on Monday. U.S. President Donald Trump had threatened to hit back with tariff action after France passed a law earlier this year that would impose a 3% tax on revenues earned on digital services in France.
Macron told reporters that companies that pay the tax would be able to deduct the amount once a new international deal on how to tax internet companies is found next year.
“We’ve done a lot a work on the bilateral basis, we have a deal to overcome the difficulties between us,” Macron told reporters, speaking alongside U.S. President Donald Trump at the end of a G7 summit in southwestern France.
France and the United States reached a deal to end a standoff over a French tax on big internet companies, though U.S. President Donald Trump declined to say whether his threat of a retaliatory wine tax was off the table as a result.
The compromise struck between French Finance Minister Bruno Le Maire, U.S. Treasury Secretary Steven Mnuchin and Donald Trump’s White House economic adviser Larry Kudlow foresees France repaying companies the difference between the French tax and a planned mechanism being drawn up by the OECD.
France’s 3% levy applies to revenue from digital services earned by firms with more than 25 million euros in French revenue and 750 million euros worldwide.
U.S. officials complain it unfairly targets U.S. companies such as Facebook, Google and Amazon. They are currently able to book profit in low-tax countries such as Ireland and Luxembourg, no matter where the revenue originates.
The row had threatened to open up a new front in the trade spat between Washington and the European Union as economic relations between the two appear to sour. Defusing the row was a positive for Macron at a summit with few concrete outcomes.
“We’ve done a lot a work ... we have a deal to overcome the difficulties between us,” Macron told a news conference alongside Trump at the end of a G7 summit in France.