US and France reach an agreement to fix disagreement over digital tax

On Monday, during a joint press briefing at G7 summit, US President, Donald Trump, and French President, Emmanuel Macron, declared consensus over a digital tax issue. Putting an end to their months-long discord, French President said, “We have reached a very good agreement. These large multinational players that don’t pay taxes, that leads to significant instability on the economic front that is not fair.”

As per the agreement, France would continue to tax the big technology companies operating in France until OECD (Organisation for Economic Co-operation and Development) launched a proper framework to charge digital tax. Once the procedure is in place, which is believed to be so by 2020, the French government committed to scarp its national tax. France also promised to return the extra money to the tech corps in case it overcharged in comparison to OECD bar.

‘Digital tax’ is a type of tax imposed on big tech firms over their income earned inside a country even if their headquarters are located somewhere else. France was the first European country, and so far the only, to introduce this tax, As per the reports, it did so to protect its companies against the giant rivals from the US and China.

France levied 3% duty over the revenue earned by the internet companies for their digital services in France. Paris proposed that the tax would be applicable to any digital company which earns over €750million per year and makes a revenue of at least €25million from France. So far about 30 companies fall into the ambit of this tax.  

The US and Chinese companies such as Facebook, Google, Apple, Alibaba, Tencent and many more decried the tax as unfair and discriminatory. The companies criticized the tax for not only causing hindrance to global business but also for being ‘complex to calculate’.

During the conference, French President Emmanuel Macron said, “There’s been a lot of anxiety because of misunderstandings on this French digital tax. We talked about it, and I think we have found a very good deal thanks to the work of ministers”.

He added, “On a bilateral basis, we have reached an agreement to fix our disagreements between us. We are going to work together to find a solution. When there’s an international taxation model, we will remove the tax — and everything that has been paid will be deducted from this international tax. We have found an agreement that is good for all parties involved.

It can solve a lot of really negative issues and improve the international system.” The reports of comprising brought much respite to the US business community as it averted the threat of another potential trade war. The world cannot take another trade war, especially with US-China trade tensions already wrecking the global economy.

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