Presidents Emmanuel Macron and Donald Trump have agreed to extend till the end of the year negotiations on a dispute over a French tax targeting online giants, postponing Washington's threat of sanctions, French officials said Tuesday.
French Finance Minister Bruno Le Maire, speaking before a Brussels meeting with EU counterparts, stated: "Macron and Trump had a very constructive discussion... and they agreed to avoid all escalation between the US and France on this digital tax issue".
A French diplomatic source announced the French and US leaders, who spoke by telephone on Sunday, agreed to give negotiations a chance to "find a solution in an international framework" and avoid "a trade war that will benefit no one".
Macron tweeted Monday that he had had a "great discussion" with Trump on the issue. "We will work together on a good agreement to avoid tariff escalation," he said.
The White House said the two men spoke and "agreed it is important to complete successful negotiations on the digital services tax, and they also discussed other bilateral issues".
Trump said Tuesday that he was "very happy with the result".
The dispute began last year when Paris approved a levy of up to three percent on revenues earned by tech companies in France, as international efforts dragged on to find a new model for taxing revenues earned via online sales and advertising.
Tech companies often pay little tax in countries in which they are not physically present.
Washington said the tax singled out US companies such as Google, Apple, Facebook, Amazon and Netflix.
It threatened retaliatory duties of up to 100 percent of the value of French imports of such emblematic goods as Champagne and Camembert cheese.
The European Union had said it would back France if such tariffs were levied, raising the prospect of a transatlantic trade war.
On January 7, Paris and Washington gave themselves 15 days to reach a deal to avert the US threat of duties on up to US$2.4 billion of French goods, which meant they should have reached a deal at Davos.
Le Maire, who has been conducting intensive negotiations for the last several weeks, had been scheduled to hold crunch talks on the issue with US counterpart Steven Mnuchin at the World Economic Forum in Davos, Switzerland on Wednesday.
"Since our two presidents spoke by phone the horizon has cleared up a bit, but it's not a done deal until it’s done," declared Le Maire before heading to Davos.
Earlier in the day in Brussels he stressed that "this remains a difficult negotiation.... A certain number of details need to be worked out, but I believe we're going in the right direction".
Le Maire declined, however, to say whether France would suspend its digital tax. "I am not going to get into the details of the negotiation," he added.
Nevertheless, according to concurring sources, France is willing to suspend the tax "to provide some time" to find a solution under the auspices of the Organisation for Economic Co-operation and Development.
France has said it would drop its tax if an international agreement is reached under the auspices of OECD.
Principle v payments
While the principle of the tax itself was not in question, the collection of payments scheduled for April and November was being suspended "to provide time for negotiations within the framework of the OECD," according to one source.
In Brussels, the industry's lobby group, the Computer & Communications Industry Association, hailed the move.
"We welcome the reported French suspension of their digital tax & the renewed focus on achieving global tax reform," CCIA Europe wrote in a tweet.
After blocking OECD talks on the issue for several years, Washington relaunched them last year only to make proposals in December which France rejected.
OECD chief Angel Gurria said in Davos on Tuesday that he believes a deal can be reached this year.
"We’ve been working for two years, we think we can deliver in 2020," he said on CNBC.
In an interview with the Wall Street Journal on the sidelines of Davos, Mnuchin said that the truce with France was "the beginning of a solution."