[governance] France Proposes an Internet Tax

[Riaz K Tayob]

France Proposes an Internet Tax
By ERIC PFANNER

PARIS --- France, seeking fresh ways to raise funds and frustrated that 
American technology companies that dominate its digital economy are 
largely beyond the reach of French fiscal authorities, has proposed a 
new levy: an Internet tax on the collection of personal data.

The idea surfaced Friday in a report commissioned by President François 
Hollande, which described various measures his government was taking to 
address what the French see as tax avoidance by Internet companies like 
Google, Amazon and Facebook.

These companies gather vast reams of information about their users, 
harnessing it to tailor their services to individuals' interests or to 
direct customized advertising to them. So extensive is the collection of 
personal details, and so promising the business opportunities linked to 
it, that the report described data as the "raw material" of the digital 
economy.

"They have a distinct value, poorly reflected in economic science or 
official statistics," the report said.

Google generates more than $30 billion a year in advertising revenue, 
including an estimated EUR1.5 billion, or $2 billion, in France. Yet, 
like other American Internet companies, it pays almost no taxes in 
France. That state of affairs upsets France's policy makers, as public 
finances have been stretched thin and French Internet companies struggle 
to gain traction.

"We want to work to ensure that Europe is not a tax haven for a certain 
number of Internet giants," the digital economy minister, Fleur 
Pellerin, told reporters in Paris on Friday.

But getting Google and other U.S. technology companies to pay more 
corporate taxes on their profits in France could take a long time, the 
report acknowledges, because this will require international cooperation.

In the meantime, France has discussed a variety of other taxes. Under 
the predecessor to Mr. Hollande, Nicolas Sarkozy, the government 
proposed a levy on Internet advertising. But that idea languished after 
local companies complained that it would affect them more than Google. 
Mr. Hollande's government is also overseeing talks between Google and 
French online publishers, who want the search engine to pay them for 
linking to their content.

The report published Friday said a tax on data collection was justified 
on grounds that users of services like Google and Facebook are, in 
effect, working for these companies without pay by providing the 
personal information that lets them sell advertising.

The report says tax rates would be based on the number of users an 
Internet firm tracked, to be verified by outside auditors. The authors 
did not recommend tax rates or estimate how much money such a levy could 
raise.

Google said in a statement that it was reviewing the nearly 200-page report.

"The Internet offers huge opportunities for economic growth and 
employment in Europe, and we believe public policies should encourage 
that growth," the company said.

The new tax would require legislation, which the government said could 
be introduced by the end of the year. But other revenue-generating 
proposals championed by Mr. Hollande have encountered difficulty. A plan 
for a 75 percent income tax rate on earnings of more than EUR1 million a 
year was rejected by the highest court in France, which called it 
discriminatory.

Any proposal to generate taxes from the gathering of personal 
information could also draw scrutiny from the French privacy regulator, 
which has raised concerns about the amount of data that companies like 
Google and Facebook collecT
NYT



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