France was set to impose a digital services tax of 3% beginning January 1, 2020.
The United States is disputing this Digital Services Tax as discriminatory against US companies and as a result, had threatened retaliatory tariffs of up to 100% on imports from France.
Recent talks between the two countries have led to a truce, with both parties standing down.
The digital services affected by the tax are digital interface and targeted advertising over the internet. The tax requires companies to calculate revenues attributable to France using a prescribed formula and pay the 3% tax based on those revenues.
The digital services tax is aimed at companies with revenues of more than $28 million dollars in France and $827 million worldwide. The United States argues that at this revenue threshold the tax falls mainly on US companies such as digital leaders Facebook, Google, Amazon and Apple. In addition, the bill specifically excludes French companies providing services where they are more successful.
Other European countries are planning to follow suit with a digital services tax of their own.
As a result, Washington threatened to impose retaliatory tariffs of up to 100% on imports of champagne, cheese, handbags and other goods from France.
France has agreed to hold off on its tax until December 2020, to avoid the threatened retaliatory tariffs and take it past the US Presidential election. In turn, the United States has postponed its threat of 100% tariffs on certain imports from France.
Both parties agree that a solution on how to tax international digital services is needed.
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