PARIS: French Economy Minister Bruno Le Maire was gung-ho about taxing digital giants like Google and Amazon on the billions of euros they generate, collectively, each year in Europe. Then he went to Washington. After three days in the U.S. capital, including a face-to-face meeting with U.S. Treasury Secretary Steven Mnuchin and calls with tech industry lobbyists, Le Maire and other European officials quickly changed their tune, offering a more subdued take on how Silicon Valley tech companies should pay into national coffers. Gone was the rabble-rousing language of taxing tech companies on their revenues rather than profits. Instead, the idea morphed into just one of many options that will be discussed by European leaders at a summit in Brussels on Friday — and it was so removed from policymakers’ thinking that the concept did not even warrant a mention in the European Council’s conclusions. “I return satisfied with the progress we’ve had from Washington on this subject,” Le Maire told a conference audience last week, in reference to taxing tech companies. “It’s the first time that France and the United States have agreed to advance the ways and means of taxing digital giants.” The climbdown by a French-led group of Europe’s largest economies that pushed for an aggressive revamp of how Europe taxes marks a significant change of fortune for some of the world’s largest tech companies, as well as smaller European countries like Ireland that have become a home away from home for Facebook and Microsoft, among others.
The standoff pitted France, Germany and others that wanted these digital players to pay more tax on their local operations in EU member countries against a vocal minority of smaller countries, including Luxembourg, that voiced anger that the region’s largest economies were trying to unilaterally change how tax was collected across the Continent and beyond. With France pulling back, at least for now, from its most radical proposals, one senior French official admitted that the debate had shifted. “A tax on revenue is one way of doing it,” the official said. “But there is no need to choose an option right away. The priority is to keep the debate moving.” Less than a month after Le Maire trumpeted widespread support for France’s plan to tax revenue — as of late September, 19 EU countries had expressed support — the rapid rethink underscores the limits for Emmanuel Macron on the European stage. The French president has glad-handed his EU counterparts, but turning those lobbying efforts into concrete policies has proved tricky.
The French concessions also highlight that, despite ongoing political problems in Washington, U.S. President Donald Trump and his officials can still throw their weight around as American lawmakers rush to make significant changes to the country’s own corporate tax system. These U.S. efforts include potentially torpedoing the French-led tax proposals by taking advantage of competitive differences among EU member countries over how tax should be paid worldwide. “I think the concept of a revenue tax does not make sense, and I don’t think that’s the right direction,” Mnuchin told reporters on the sidelines of annual meetings of the World Bank and International Monetary Fund last week.
