The recent IGA (Inter-Governmental Agreement) between France and the United States has been a topic of interest in the international community. The agreement, signed in April 2019, is aimed at resolving the issue of digital taxation, which has become a major point of contention between the two countries.
The French government has been pushing for a digital tax on companies such as Google, Amazon, Facebook, and Apple, commonly known as the GAFA companies. These companies have been accused of making huge profits in France without paying sufficient taxes. In response, France proposed a 3% tax on the revenues of these companies generated in France.
The US government, on the other hand, considers this digital tax as discriminatory against US companies and has threatened to impose retaliatory tariffs on French products. The IGA is seen as a way to avoid this trade conflict and achieve a mutually beneficial solution.
The IGA establishes a framework for cooperation and coordination between the tax authorities of France and the United States. It also aims to prevent double taxation, meaning that companies will not be taxed twice for the same income in both countries. Additionally, the agreement seeks to find a long-term solution to the digital taxation issue through negotiations at the OECD (Organisation for Economic Co-operation and Development).
While the IGA has been welcomed as a step in the right direction, it is not without its critics. Some experts have argued that the agreement does not address the fundamental issue of digital taxation and shifts the focus to the US-France relations rather than the broader international community.
Furthermore, the IGA is a temporary solution, and the negotiations at the OECD may take several years to reach an agreement. In the meantime, other countries may follow France`s lead and implement their own digital tax, potentially leading to a trade war.
In conclusion, the IGA between France and the United States is a significant development in the ongoing digital taxation debate. While it offers a temporary solution to prevent a trade conflict, a long-term solution must be found through international cooperation and agreement. It remains to be seen how other countries will react to France`s digital tax and whether the OECD negotiations will result in a global solution to the issue.