French Finance Minister Bruno Le Maire said Friday that France is opposed to a U.S. proposal this week that would let companies opt out of proposed amendments to the international tax system.
“We have serious concerns regarding potential mandatory departures from arm’s-length transfer pricing and taxable nexus standards—longstanding pillars of the international tax system upon which U.S. taxpayers rely,” Mnuchin wrote to OECD Secretary-General Jose Angel Gurria.
Many of the OECD countries are considering fixes to the international tax code that allow digital products to go untaxed by letting companies book revenues in low-tax countries like Ireland, regardless of where the paying customer lives.
Le Maire said that Mnuchin’s “safe-harbor regime” proposal for the Pillar One reforms would mean U.S. companies could opt in or out as they pleased, which he said would be unacceptable to France and other OECD countries.
He urged Washington to negotiate on the basis that the new tax rules be binding, and said if the efforts at the OECD fell through, EU countries should revive talks for a European digital tax.
“We raise this concern, as it may impact the ability of the 135 countries that are now participating in this process, to move forward within the tight deadlines we established collectively,” he wrote.
‘Unreasonable, Discriminatory’
In his letter to the OECD Secretary-General, Mnuchin expressed opposition for unilateral digital services taxes, which the administration has argued would disproportionately impact American tech companies like Amazon, Apple, Facebook, and Google.“We urge all countries to suspend digital services tax initiatives, in order to allow the OECD to successfully reach a multilateral agreement,” he wrote.
Mnuchin’s letter came a day after President Donald Trump criticized French President Emmanuel Macron for the country’s new 3 percent digital services tax on revenues tech companies generate in France.
“So it’s either going to work out, or we’ll work out some mutually beneficial tax,” Trump added. “And the tax will be substantial. I’m not sure it’s going to come to that, but it might.”
The United States has threatened to impose 100 percent tariffs on a raft of French products, including Champagne, cheese, and handbags, over France’s digital services tax.
Lighthizer added that the USTR is “focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies.”
The USTR said that it also considering opening investigations into digital services taxes in other countries.