Hopes are rising that a breakthrough in discussions on how to tax digital companies will emerge at the World Economic Forum on Wednesday.
José Ángel Gurría, the secretary general of the Organization for Economic Co-operation and Development group of leading industrial nations, told The Associated Press that he expects there to be a solution as "there is no plan B."
The OECD has been seeking to come up with a framework that would allow France to suspend its tax on the digital business of big tech companies like Amazon and Facebook. In return, the U.S. is expected to agree to an international approach to the issue and hold off retaliatory tariffs on the European Union.
French Finance Minister Bruno Le Maire , U.S. Treasury Secretary Steven Mnuchin and Gurría are set to meet later Wednesday at the gathering of the elites in the Swiss ski resort of Davos.
In July, France caused consternation in the Trump administration when it pushed ahead with plans to slap a 3% tax on the French revenues of internet giants like Google, Amazon and Facebook. The tax is an attempt to get around tax avoidance measures by multinationals, which pay most of their taxes in the EU country they are based in — often at very low rates. That effectively means the companies pay next to no tax in countries where they have large operations.
The tax applies to the digital business of companies that have global revenues of over 750 million euros ($833 million), and French revenue over 25 million euros. The revenue threshold is supposed to allow more room for startups. France argues that tech companies are abusing their market dominance, notably through tax avoidance, and preventing others from a fair chance of competing.
Speaking Wednesday on CNBC from Davos, Trump faulted Europe for being "very tough" with the United States, though he had had a "great talk" with EU Commission President Ursula von der Leyen a day earlier.
"But I said 'If we don't get something, I'm going to have to take action. And the action will be high tariffs on their cars and other things that come into our country.'" he said. "Now saying that, I don't want your audience to get nervous. They (Europe) are going to make a deal because they have to."
"They have no choice," he said.
To avoid an escalation, the U.S. and France agreed in August to take a lead in forging an international agreement on how to tax digital business by mid-2020.
Hopes for an agreement rose Monday when French President Emmanuel Macron said in a tweet that he had had a "great discussion" with Trump on the digital tax issue. "We will work together on a good agreement to avoid tariff escalation," he said.
Gurría urged those involved to give "the time and the space" to the effort to create a global deal on the issue.
"Everybody will gain from that and then you won't have to be having these bilateral confrontations," he said.
"We are working very hard, we have 107 countries working on this, its not like a small club."