Digital Services Taxes: US, France Agree To Hold Off On Levies, Retaliatory Tariffs

French President Emanuel Macron said Monday he had reached a breakthrough with U.S. President Trump over digital services taxes and the two would work together to avoid a tariff war.

Macron said in a tweet he and Trump had a “good discussion,” raising hopes the digital tax spat would not lead to a broader trade war.

The French Senate in July passed a measure imposing a 3% tax on large tech firms that provide services to French users. The tax was seen as aimed at Apple, Facebook, Amazon and Google and was projected to raise $28 million in France and $832 million worldwide. Trump took offense, tweeting that if anyone taxes U.S. tax firms, it will be the United States. He then threatened to impose tariffs on $2.4 billion in French goods.

A French diplomatic source told Reuters the two leaders had agreed to hold off on any tariffs while discussions continue at the Organization for Economic Cooperation and Development, which has proposed a global minimum level of corporate taxation.

“They agreed to give a chance to negotiations until the end of the year,” the source said. “During that time period, there won’t be successive tariffs.”

The Financial Times reported the French Finance Ministry said the two sides had agreed to a ceasefire until the end of the year.

Finance Minister Bruno Le Maire said talks with the U.S. had been “very difficult” and France had made a number of concessions, including delaying the actual tax payments to give the OECD time to act.

“It’s one of the most difficult negotiations that I have led. It’s far from won,” Le Maire told the Times.

Both France and the U.S. are involved in the OECD effort to develop global rules for digital taxation.

“What I am trying to impress on our American friends is that the fight is not between France and the U.S., or Europe and the U.S. -- the fight is to put in place just taxation on digital activities,” Le Maire said.

EU Trade Commissioner Phil Hogan said last week the EU would back France if the dispute cannot be resolved, threatening to increase tensions resulting from a World Trade Organization dispute over aircraft subsidies, which led to $7.5 billion in U.S. tariffs on EU goods.