[governance] France Proposes an Internet Tax

Mon Jan 21 05:32:05 EST 2013

On Mon, Jan 21, 2013 at 9:39 PM, Riaz K Tayob <riaz.tayob at gmail.com> wrote:

>
>  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.
>

Well it not new that the US has always maintained that the Internet should
be a tax free zone as per the US Congress's Tax Freedom Act 1998 (*authored
by Representative Christopher Cox and Senator Ron Wyden and signed into law
on October 21 1998 by then President Clinton*) which following expiry
continued to be reauthorised and it most recent re-authorisation (legal
speak for extension) was in October 2007 where this has been extended till
2014.

The OECD and the EU have been holding the opposite view (Kurbalija,J. 2010)
- see their Ottawa Principles where they find that there is no difference
between traditional and e taxation that would require special regulations.

 It followed that in 2003 when the EU introduced a regulation requesting
non EU e commerce companies to pay value added tax (VAT) if they sold goods
within the EU. The main driver or motivation was that non-EU companies
(many of whom are US companies) had an edge over European companies. See
one of the Reports - http://www.oecd.org/tax/taxadministration/20499630.pdf

What is interesting is in light of the pressure on the economic systems in
Europe triggered by the Greek economy and reliance on the Euro and
aggravated by other external triggers such as food, energy and water crisis
and even with the Indonesian and US Trade disputes will together with a
host of other triggers have a cumulative effect that will force the outcome
of tomorrow's Internet and tomorrow's regulations.

Each country will ultimately exercise their sovereignty in how they
regulate within their own turfs. For countries like France where their is
high expenditure within their national budgets, in the midst of a depressed
economic region will no doubt look for potential sources of revenue.
Discussions on taxing the internet is not new, what will be interesting
however is the "how" and to "what extent"?

>
> 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 €1.5 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.
>
> Does anyone have a link to this Report? It would be useful to read.

> 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 €1 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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