Global deal over digital tax eludes France, US in Davos talks

France and the United States failed on Wednesday to agree how to push forward a global rewrite of decades-old cross-border tax rules though they agreed to set aside a bilateral row on digital taxation, France’s finance minister said on Wednesday.

Governments from nearly 140 countries aim to give their backing to pursue what would be the biggest overhaul of international tax rules since the 1920s at the end of the month at the Paris-based Organization for Economic Cooperation and Development.

But preparations led in part by France and the United States have been eclipsed by a bilateral dispute between the two with Washington threatening retaliatory tariffs against Paris’ own national tax on big tech companies that book out-sized profits on French income despite minimal physical presence.

The United States has further complicated the backdrop for a global deal by proposing last month that the future rules should be optional for companies.

Calling a truce until the end of the year, French Finance Minister Bruno Le Maire said he had agreed with US Treasury Secretary Steven Mnuchin in Davos that France would not require companies to pay its digital tax this year and that Mnuchin had agreed to suspend the tariff threat in the mean time.

Le Maire added: “The US and France committed themselves to work on a global international solution on digital taxation and international taxation.”

“But we still need to have a clear understanding of what will be the working basis at the OECD and we want this basis to be solid, credible and fair.”

He said that the future tax rules could not be credible if they were optional for companies and said he would meet again with Mnuchin on Thursday to discuss the issue.