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U.S. President Donald Trump, right, embraces Emmanuel Macron, France's president. Image Credit: Bloomberg

Paris: Emmanuel Macron and Donald Trump have agreed to extend negotiations on a dispute over a French tax on digital giants to the end of the year, postponing Washington’s threat of sanctions against Paris, a French diplomatic source said Monday.

The source said the French and US presidents, who spoke on Sunday, had agreed to give negotiations a chance to “find a solution in an international framework” and avoid “a trade war that will benefit no one”.

Macron tweeted earlier Monday that he had had a “great discussion” with Trump on the issue. “We will work together on a good agreement to avoid tariff escalation,” he said.

The dispute began last year when Paris approved a levy on up to three per cent of revenues earned by technology companies in France, as international efforts dragged on to find a new model for taxing revenues earned via online sales and advertising.

Tech companies often pay little tax in countries in which they are not physically present.

Washington said the tax singled out US companies such as Google, Apple, Facebook, Amazon and Netflix, and threatened duties of up to 100 percent of the value of French imports of such emblematic goods as Champagne and Camembert cheese.

On January 7, the two sides gave themselves 15 days to reach a deal to avert the US threat of duties on up to $2.4 billion of French goods.

French Finance Minister Bruno Le Maire, who has been conducting intensive negotiations for the last several weeks, is due to meet US Treasury Secretary Steven Mnuchin at the World Economic Forum meeting in Davos on Wednesday.

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They are expected to continue talks seeking a negotiated agreement in the Organization for Economic Cooperation and Development (OECD).

“France is pursuing its objective of fair taxation on digital companies and finding a compromise within the framework of the OECD,” the French presidency said on Monday.

France has said it would drop its tax if an international agreement is reached.

After blocking the OECD talks for several years, Washington relaunched them last year only to make proposals in December which France rejected.