Presidents Donald Trump and Emmanuel Macron have declared a truce on a digital tax dispute that was ratcheting up between France and the U.S.
In July 2019, the French senate has approved a digital tax scheme that targeted any digital company, including Apple, with revenue of more than $750 million, of which at least $28 million is generated in France. Approximately 30 different companies, including Apple, Alphabet, Facebook, Microsoft, and Amazon were likely to be impacted by the tax, which requires they pay a 3 percent tax on sales made in France.
In December, the U.S. government on Monday said it was considering slapping punitive duties of up to 100% on $2.4 billion in imports from France of Champagne, handbags, cheese and other products, after concluding that France’s new digital services tax would harm U.S. tech companies.
The truce means neither side will impose punitive tariffs this year, a French diplomat said.
“Great discussion with @realDonaldTrump on digital tax,” Macron said in a tweet. “We will work together on a good agreement to avoid tariff escalation.” The Bloomberg dollar index pared gains to trade little changed and the euro undid an earlier decline after the news.
The two countries will continue negotiations along with their European partners until the end of 2020 in order to agree a global framework that ensures tech companies pay an appropriate amount of tax, the diplomat said… The agreement also carries the two sides beyond this year’s presidential vote in the U.S., where Trump will be seeking reelection.
Great discussion with @realDonaldTrump on digital tax. We will work together on a good agreement to avoid tariff escalation.
— Emmanuel Macron (@EmmanuelMacron) January 20, 2020
MacDailyNews Take: There is a thin line between compromise and capitulation. Regardless of how you characterize this development, it’s far better to see the U.S. and France working together than opposing each other.