France agrees to delay new tax on tech giants

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France has agreed to delay collecting a new tax on multinational technology firms until the end of 2020, a French government official has told the BBC.

The digital services tax has provoked an angry response from Washington.

The US had threatened to impose retaliatory tariffs on $2.4bn (£1.8bn) of French goods, including champagne and cheese, after the tax was passed in July 2019.

The US will not introduce extra import taxes this year, the official said.

The rapprochement was the result of a conversation between President Trump and President Macron on Monday.

Global tech giants including Google, Apple, Facebook and Amazon would have been due to make tax payments equivalent to 3% of their French revenues in April and then again in November.

France, along with several other European countries, pushed ahead with its own digital sales tax while it waited for a multilateral agreement about how such firms should be taxed to be drawn up by the Organisation for Economic Cooperation and Development (OECD).

If the OECD reaches a deal by the end of 2020, then France’s unilateral tax will not be applied at all. If there is no multilateral agreement by then France will collect the two tranches of the tax.

Payments were already collected in November for 2019 on revenues from July. Those are still subject to final adjustments but will not be refunded under this agreement.

What is a digital sales tax?

France, along with several other European countries, wants to limit the tech giants’ ability to avoid taxes.

Many governments are concerned that US technology giants are avoiding taxes in the European Union. They argue taxes should be based on where the digital activity – browsing the page – takes place, not where firms have their headquarters.

The UK, Italy, Austria and Turkey are all considering imposing new levies themselves.

But trade officials in Washington say US firms are being unfairly targeted.