Detente is ending in the global fight over tech taxes.
Earlier this year, France agreed to suspend collection of a tax on digital revenue from large technology companies such as Facebook Inc., Amazon.com Inc. and Alphabet Inc.’s Google. Meanwhile, the U.S. delayed the application of tariffs it was putting on French goods in retaliation for the tax.
But now France has resumed collecting what is known as its digital-services tax, a French official said. Other countries, including Italy and the U.K., whose similar taxes went into effect this year, are also set to begin collection in coming months.
The U.S., meanwhile, is set on Jan. 6 to impose tariffs on $1.3 billion of French imports, including cosmetics and handbags. Washington also has pending investigations that could lead to similar tariffs on 10 other countries, including the U.K., Italy, India and Spain.
At issue in the dispute is how to tax an increasingly digital economy. For decades, tax treaties have generally allocated corporate profit based on where value is created. But modern multinationals—particularly ones with digital offerings—can sell their products across borders in ways that leave little taxable profit in a country where those products are consumed.