The French parliament approved a 3% digital tax last July. However, in January this year, France agreed with the United States on a ceasefire to provide more time to resolve the issue, including through talks within the Organization for Economic Co-operation and Development (OECD).
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Following the armistice, France postponed tax collection and Washington promised not to impose planned retaliatory duties. However, the United States suspended negotiations with other OECD countries in June, and a solution is not expected by mid-next year.
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“It simply came to our notice then. Technology companies are big winners of the pandemic, “a French official told FT, but he did not provide further information. He added that technology companies had significantly increased turnover, but did not pay fair taxes even before the pandemic.
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Washington sees the collection of the digital tax as an example of unfair business practices because it will mainly affect American companies. The United States is now expected to impose promised tariffs on French goods in retaliation. The new dispute could worsen the situation before the arrival of new President Joe Biden, who said he wanted to settle diplomatic and trade tensions with the European Union.
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The introduction of the digital tax has been proposed or already enacted by several other countries, including the Czech Republic. The United States announced in the summer that several countries are investigating the introduction of the tax and that additional tariffs could result.
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