France postpones digital tax
France and the US have reached a temporary agreement in their dispute over a French digital tax on tech giants to avoid a trade war. Paris has announced it will postpone the prepayments due on the digital tax it introduced in July 2019 until the end of this year. In return, the United States will refrain from imposing retaliatory tariffs on products such as wine and cheese. Will the tax now become a European project?
A sensible retreat
Backing down is the right move for Macron in a risky conflict, comments Thomas Hanke, Paris correspondent for Handelsblatt:
“The US government is not behaving destructively on this issue. US President Donald Trump has lifted the blockade that his predecessor Barack Obama erected when working on an international tax on digital transactions. But with just a few months to go before the presidential election, Trump doesn't want to introduce a new tax in Congress which would burden the big American Internet companies in particular. ... Paris is not giving anything away. If there is still no sign of an international solution after the US election, France can put its national digital tax into effect at the end of the year. Paris is only waiving the advance payment of the amounts due - a few hundred million euros.”
Just small change in the power game
NRC Handelsblad sees the French president's talent for power politics as proven:
“Macron is probably not dissatisfied. When he announced the tax there were also domestic political interests behind it: it was one of the demands of the yellow vests, who wanted 'big business' to be taxed more heavily. But he had also said from the start that the digital tax did not have to be permanent and would be off the table as soon as the OECD presented a good plan. So scrapping it is apparently just a small change that Macron was able to risk relatively painlessly in the tough power game with Trump. Macron is one of the few European leaders who is good at this game. Now, however, the OECD must also deliver.”
Good chances of a European solution
After the temporary waiver of its digital tax, France wants to work harder to find an international solution. Now the likelihood of a joint European initiative is increasing, business newspaper Les Echos believes:
“Ireland has become the European 'hub' of US technology, and will therefore be particularly hard to convince. But political pressure could prompt it to yield - especially in this Brexit period when it has so much to lose and is calling for solidarity between the 27. Brussels has already experienced such miracles. Who would have thought that it would succeed in convincing Luxembourg - which derives all its power from its financial institutions - to lift banking secrecy? ... It isn't forbidden to dream of an identical scenario in Ireland.”