The United States’ trade war with China may have dominated the headlines in recent months, but bear in mind that this is not the only problem in the minds of American multinationals when it comes to taxation and international disputes. Well, at least one of these problems can be overlooked – for now.
As reported by Reuters, the governments of USA and the France recently established a truce to prevent, at least for now, the European country from imposing taxes on technological multinationals, including Apple.
For context, let’s go back to December 2018, when the French Senate approved the application of a 3% rate sales of multinationals in French territory. All digital services companies with revenues in excess of € 25 million in France and € 750 million globally would fall under the new tax – that is, giants like Apple, Google, Amazon and Facebook would be the main targets of the new policy.
The tax would be applied retroactively, as a way to «compensate» the maneuvers of multinationals to pay less taxes – Apple, for example, redirects much of its international sales to Ireland, due to the tax benefits it has there.
In retaliation, the US government threatened to impose a series of taxes on French products exported to the country, such as sparkling wine, bags and other types of goods. According to Washington, France’s decision would be unfairly focused on American technology companies, which would justify the answer.
The threat seems to have worked: yesterday (1/20), the French president, Emmanuel Macron, said he had a “good discussion” with Donald Trump; leaders have negotiated a temporary truce to suspend the application of fees, and a potential tariff war will not be discussed again until the end of 2020.
The deadline is not arbitrary: as we have already said, the OECD (Organization for Economic Cooperation and Development) is currently in discussions to plan a global tax reform, which could curb the strategies of multinationals to redirect their profits to specific countries ( such as Apple in Ireland). France believes that, by the end of 2020, the reform will already be decided – and in that case, there will be no need for the country to apply the rates on its own.
We will see, therefore, what this is all about.