France, US reach digital tax compromise

French and U.S. officials have reached a compromise on a controversial French digital tax at the G-7 summit in Biarritz, France, a senior Trump administration official confirmed to FOX News.

French Finance Minister Bruno Le Maire, U.S. Treasury Secretary Steven Mnuchin, and White House economic adviser Larry Kudlow negotiated the détente, with France refunding U.S. companies the difference between the tax and a planned mechanism being drawn up by the Organization for Economic Co-operation and Development (OECD). FOX News' John Roberts confirmed the news regarding agreement.

France’s 3% levy would apply to revenue from digital services earned by firms with more than 25 million euros ($27.86 million) in French revenue and 750 million euros ($830 million) worldwide.

During a G-7 summit press conference, French President Emmanuel Macron said the digital services tax compromise was positive and not aimed at any country in particular.

The levy, which provoked President Trump to threaten a retaliatory tax on French wine imports, has rippled through the digital community.

The precedent-setting tax has been castigated by Trump, and the U.S. Trade Representative’s Office described it as “unreasonable.” The office opened a public comment period on new French tariffs and other trade restrictions, which closed on Monday, as the compromise was reached. Several EU countries like Austria, Spain and Italy, as well as Britain. have proposed potential digital taxes.

Google, Amazon, Facebook and other tech giants testified at a recent congressional hearing that American companies would be disproportionately affected.

Facebook global tax policy head Alan Lee testified that the tax “poses difficulties for Facebook’s business model and will hinder growth and innovation in the digital economy” and would require a re-construction of its systems. Lee believes the inclusion of the tax will take time and resources to capture data for audit purposes.

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Google's vice president of government affairs and public policy, Karan Bhatia, expressed company support for modernization of digital regulation. Nevertheless, Bhatia said reform must reflect fair business practices.

He stands by a comprehensive multilateral approach from regulatory bodies in order for tech companies to continue providing uninterrupted service. Unilateral proposals like France’s are obsolete and potentially harmful, he said.


"That kind of race to the bottom would create new barriers to trade, slow cross-border investment, and hamper economic growth," Bhatia said.

Big tech has not yet issued a response to the compromise.