US and France have reached a deal on digital tax, Macron says

The U.S. and France have struck a deal to settle their differences over a French digital tax on big tech companies, French President Emmanuel Macron said on Monday.

Under the deal, France will eliminate its 3% tax once a new international agreement on digital taxation is reached, Macron said. The companies that pay France’s tax will be reimbursed once the international agreement is in place, he added.

“We’ve done a lot a work on the bilateral basis, we have a deal to overcome the difficulties between us,” Macron said, speaking alongside U.S. President Donald Trump.

France passed a 3% tax in July that targets around 30 big tech companies including Facebook, Amazon and Google. It applies to firms with annual revenues of more than 750 million euros ($830 million) arising from “digital activities,” including 25 million euros ($27 million) made in France.

French Finance Minister Bruno Le Maire has said the tax is necessary to make internet giants pay their fair share of taxes. France’s finance ministry estimates the tax will raise 500 million euros per year.

The U.S. opened an investigation into the measure in July, saying it “unfairly targets American companies,” while President Trump has threatened to impose tariffs on French goods in retaliation. Big tech companies testified against the tax earlier this month as part of the U.S. investigation, with Amazon saying it would be forced to pass down some of the costs to small and medium-sized enterprises in France.

France pushed forward with its own domestic tax on digital companies after an EU-wide effort failed last year. However, EU chief Donald Tusk said at the G-7 summit on Saturday that the EU would “respond in kind” if France was targeted by the U.S. in response to its digital tax.

The Organization for Economic Cooperation and Development (OECD) is working on a multilateral solution for digital taxation but has said it won’t reach a conclusion until 2020. 

— Reuters contributed to this report