The United States and France have reached an agreement on a draft proposal for the widely-debated French digital services tax during the G-7 summit but U.S. President Donald Trump said on Monday that he is positive the two sides are close to reaching a compromise.
According to CNBC, Trump said on Monday that the two sides are nearing a compromise regarding France's digital tax on American firms that offer internet-related services to French consumers.
France's three percent tax that came to light last month is due to hit around 30 "Big Tech" firms and many of these are American companies. The tax is applicable to companies earning over 750 million euros annually from digitally-made transactions.
The French government has been cracking down on several tech giants including Google, Amazon, and Facebook. The said firms are three of the biggest tech businesses with U.S. roots.
Trump has threatened to impose tariffs on several French goods after the new digital tax was overwhelmingly approved by French lawmakers in July. His comments have since triggered tensions between the two countries.
For Trump, France's digital services tax is primarily targeted against American companies. However, it is worth noting that the French government has been working on encouraging Brussels to adopt its digital tax all over the European Union (EU).
Recent reports point to France's digital tax as a means of helping European-born tech companies build their own names globally. So far, the global big tech giants include U.S. firms as well as Chinese behemoths Tencent and Alibaba.
An insider with knowledge of the situation revealed that the proposal was drafted amid Trump's threats of imposing tax duties on French wine imports to his country. "Trump's advisor is OK with the proposal," a source said.
If the proposal is officially signed, France may be forced to pay back companies under a mechanism that the Organization for Economic Cooperation and Development (OECD) will create in light of the dispute.
U.S. Treasury Secretary Steven Mnuchin and top White House economic adviser Larry Kudlow tried to strike a deal with French Finance Minister Bruno Le Maire over the weekend.
During a media briefing on Monday, Trump also taunted that tariffs on French wine will depend on a digital tax deal that negotiators from both countries are trying to agree on. No other details were provided but he confirmed that talks are still on.
The U.S. has its own crackdown on American big tech. Smaller firms said they see Washington's move on tech giants for potential antitrust violations as an opportunity to make a name for themselves in the spotlight.
