France proposes an internet tax on American companies collecting personal data.

France is seeking new ways to raise funds.  Because of frustration with American technology companies that dominate its digital economy which are largely beyond the reach of fiscal authorities, France has proposed a new levy.  They are proposing 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 €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.

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.

Photo credit: The Lonely Conservatives

Via New York Times