Briefing

U.S. and France strike temporary compromise on three per cent tax for tech giants

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If the OECD agrees on a tax rate lower than the three per cent for firms with US$850 million in annual revenue and at least US$28 million in the country, Paris will reimburse companies that have paid the higher rate. (The Logic)

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Talking point: Monday’s compromise puts additional pressure on OECD negotiators, who are trying to come up with a single tax for foreign-based tech companies that all member states will implement simultaneously. The timeline for that potential deal has been repeatedly pushed back. In July, a French official said a deal could be expected by the end of 2020. On Monday, French President Emmanuel Macron reiterated that the OECD deal is expected in 2020. This new compromise follows weeks of intense pressure from both the U.S., which threatened retaliatory tariffs on French wine, and U.S. tech giants, including Amazon and Apple. When asked Monday if he would introduce a domestic tax on tech giants, Canadian Prime Minister Justin Trudeau pointed to ongoing multilateral negotiations. There remain a number of sticking points for the OECD negotiation. Most significantly, France wants the global tax to apply to tech companies exclusively, while the U.S. is pushing for it to apply to all companies. That would affect the profits of French companies like Louis Vuitton that have significant Chinese operations. The next OECD working group on the digital economy meeting is scheduled for October 1.