On Thursday, France’s finance minister, Bruno Le Maire shared an optimistic view about the possibility of reaching a deal on a ‘global digital tax’. Earlier, French’s proposal for a global tax on digital companies was stuck as the US opposed the initial proposal. The US and France held a talk on Wednesday and both have agreed with the idea about an international framework for digital tax.
France and the US Compromise
Earlier, the Trump administration had warned France that Washington would impose tariffs on exports of Paris-based products including champagne and other luxury goods in retaliation for a French’s proposed digital tax. As Reuters reported, the relationship between Washington and Paris showed a little relief after French President Emmanuel Macron and Trump held a phone call conversation on last Sunday.
Le Maire revealed that the US has agreed to an international framework developed by the Organization for Economic Cooperation and Development (OECD) for digital taxes. Meanwhile, the French minister also asserted that the two countries had certain issues especially on how to move on with the proposed deal.
Besides the challenges of rewriting the decade-old rules for cross border taxes, the two leaders agreed to work on the global initiative. On Thursday, Le Maire told Reuters TV at the World Economic Forum in the Swiss ski resort of Davos, “We are moving in the right direction,” referring to the last talk held between the two countries.
However, some countries including Italy and Britain have already started pursuing or imposing their own national digital-tax regimes. The French finance minister moved forward the proposal saying that the world needed an international framework that would include every country.
Le Maire said on Thursday that the world would be facing a conflict of systematic disorder without the global rules and many economic challenges would remain unidentified. Maire insisted, “So we have to build something different and that’s exactly what we want to do during 2020, by building on the extremely good work being done (at the OECD).”
Tax Structure Proposed by OECD
The new global tax on digital companies in which many countries including France and the US would be based on the policies suggested by the OECD. Following the recent development, OECD Secretary-General Angel Gurria who has been working for creating on global digital taxation shared a view that the world must reach an agreement on the issue by the end of 2020.
Gurria, speaking on a panel at the World Economic Forum, expressed that the new deal on digital taxation would include more than 130 countries and the deal framework would be expected by July 2020. The OECD Secretary-General declared, “We have no Plan B — we just have to get it done.”
Unlike the existing digital tax of French which is based on the company’s turnover, the OECD’s proposed tax system would be levied on the company’s profit. According to Reuters, however, the proposed deal would need a series of meetings and negotiations among the world’s leaders to discuss how to calculate and on which basis the taxes would be calculated.
Referring to the new development, Maire declared, “Everything is on the table… We just have to decide if we want to avoid a loophole in the international taxation system or have many national solutions that would be detrimental to all of us.” Maire emphasized, “We just can’t go on any longer with a taxation system in which the richest companies, those that are making the biggest profits, are paying the least tax.”
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