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France's Le Maire Says COVID-19 Makes Tax Reform Crucial

By Matt Thompson · 2020-05-04 13:34:20 -0400

Efforts to reform the international tax system are more important than ever because of the novel coronavirus pandemic, which has given already low-taxed digital companies an additional advantage, France's finance minister Bruno Le Maire said Monday.

Large digital companies are enduring the crisis well because they are the only businesses that can operate unhampered by severe restrictions on in-person meetings, Le Maire said at a live event hosted by social networking site LinkedIn.

"This crisis shows that those who are [coming] out the best are the digital giants, simply because they are able to keep their businesses going and yet they are the ones that are the least taxed," Le Maire said.

The Organization for Economic Cooperation and Development is working on proposals to rewrite the international tax rules in light of the growth of the digital economy. The work is being conducted in two streams, or pillars, the first of which concerns allocating taxing rights to jurisdictions where the customer rather than the company is based. The second pillar is a proposal to develop a global minimum corporate tax rate.

The OECD is continuing its work on the two pillars, Pascal Saint-Amans, the official heading up the project, told a virtual meeting Monday, but key meetings have been pushed back to October and some aspects of the work may be delayed beyond the initial end-of-year deadline.

In the absence of a global agreement on how to tax digital giants such as Google, Apple, Facebook and, several European Union countries and senior officials at the European Commission, the EU's executive branch, have called for a deal at the European level.

Internal EU documents seen by Law360 last year called for the bloc to speak with one voice on the issue of digital tax — a call Le Maire echoed Monday.

The digital tax proposal "is more relevant than ever, and I hope that our European partners will recognize the absolute necessity to step up the taxation of digital giants," he said.

The U.S. moved to impose trade sanctions on France when it unilaterally applied a digital services tax. The U.S. agreed to delay the imposition of tariffs on French goods in exchange for the French agreeing to not collect the tax until after the OECD process has concluded, and nix the tax in the event that a better global solution is reached. 

The French finance ministry was unavailable for additional comment.

--Editing by Neil Cohen.

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