The G7 meeting occurring in France has seen an important resolution of an issue that was causing significant tensions between the United States and France. French President Emmanuel Macron has announced that an agreement has been reached to settle the dispute surrounding the French tax on tech companies.
In July, the French government passed a tax that would apply to tech companies. Under the law, a tax of three percent would be levied on any tech company doing business in France with total revenues of over $830 million. 30 of the largest tech companies in the world would be included in this new tax including the large US tech firms of Amazon, Google and Facebook. The French government claimed that this new tax was necessary to make sure that tech companies paid their fair share in taxation.
The United States opposed this new taxation stating that it was unfairly targeting companies based in the United States. The Trump administration stated that tariffs would be imposed on goods such as French wines if the taxes were not repealed.
Under the agreement reached between the United States and France. the French government has agreed to remove the tax once the the Organization for Economic Cooperation and Development(OECD) has reached an agreement on multi-national digital corporation taxation. The OECD has stated that they believe that they will have reached some sort of agreement in 2020.
Until the OECD agreement is finalized, the companies will have to pay the three percent tax. However, the French government has stated that those companies who are owed any money in light of the new agreement will receive a reimbursement from the French government. The three percent French tax will be replaced by the taxation level that is agreed upon by the OECD.
This agreement between the US and France will now eliminate fears of another trade war between the US and a significant trading partner. The European Union had threatened to impose tariffs on US goods if the US had imposed tariffs on French products.