France is to push ahead with a digital service tax on internet giants including Google, Amazon and Facebook, risking the retaliatory tariffs from the US.
Several governments – including the UK – have been trying to agree a multilateral digital tax framework only to meet opposition from the US, which is home to many of the tech companies who would be most affected.
French tax authorities have pressed on with implementing their own digital tax measures, contacting affected tech giants to demand tax payments for 2020, according to the FT.
Handbags at dawn
President Trump’s administration may look to impose retaliatory tariffs on France as a result, including tariffs of 25% on $1.3bn worth of French handbags and make-up.
The trade battle is a headache for President-elect Joe Biden, who wants to restore a more collaborative trading relationship with the EU but faces bipartisan pressure in Congress to protect the interests of the US tech sector.
The UK is among the OECD countries collaborating on the multilateral framework for taxing digital companies, who have been criticised for paying too little tax by routing profits through low-tax jurisdictions such as Ireland.
The UK introduced its own digital services tax in April 2020, which applies to businesses with more than £500m in global group digital services revenues and £25m in UK digital services revenues.
The US suspended its involvement in multilateral negotiations in June, saying it felt its own tech sector was disproportionately affected.
Digital tax has also become a thorny issue in negotiations for a trade deal between the UK and US.
France goes it alone
France continues to argue for an EU framework to be put in place in case the OECD negotiations bear no fruit, but for now it is prepared to go it alone.
“We can’t wait any longer and the tech companies are the big winners of the pandemic,” said one French official to the FT, adding that the European plan was “a lever” in the current negotiations.
“Their turnover is soaring, and they haven’t been paying fair taxes even before the pandemic.”