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Monday, January 28, 2013

Should Internet Data Be Taxed?

By: Chris Crum 
French President François Hollande commissioned a report that was presented last Friday, which describes a new Internet tax that would attempt to collect revenue from Internet companies based on the amount of users whose data they track and monetize. 

Should Internet data be taxed anywhere?

Eric Pfanner at The New York Times explains:
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.
Obviously the idea has been controversial, and has drawn a great deal of criticism. For example, Nicholas Carlson at Business Insider says the "French view of the Internet will make you want to pull your hair out," adding, "Users are not, 'in effect' or otherwise, 'working for these companies without pay by providing the personal information that lets them sell advertising. They are using products for free! NO ONE IS MAKING THEM USE FACEBOOK OR GOOGLE, SHEESH."

France has been looking at Google's tax practices for a couple years now, as the French government has accused the company (and others) of playing the tax system by placing their European operations in places like Ireland or Luxembourg, where tax rates are lower. 

On Thursday, French Industry Minister Arnaud Montebourg said France has decided to go after all big Internet firms "curbing legal tax avoidance," as Reuters puts it, to collect payment of back taxes. Reporter Brian Love writes:
The government had decided, Montebourg said on France 2 television, "to launch tax retrieval procedures covering all of the Internet giants".

He did not elaborate and it was not clear whether the comment, made in a wide-ranging interview about French industry, referred specifically to existing tax investigations of the Internet search engine and retail giants Google (GOOG) and Amazon (AMZN), or was suggesting a broader campaign.
Meanwhile, talks between Google and publishers in France over payments for links are at a stand-still, according to ZDNet, which cites French newspaper Le Monde. We reported on this situation last fall, when Google prepared a note about a link tax proposal by French lawmakers (backed by the publishers). 

Google's Director of Public Policy in France, Oliver Esper, said at the time, "The web has led to an explosion of content creation, by both professional and citizen journalists. So it's not a secret that we think a law like the one proposed in France and Germany would be very damaging to the internet. We have said so publicly for three years."

He later added, "We have always been and remain committed to collaborate with French Publishers associations as they experiment and develop sustainable economic models on the Internet."

Google executive chairman Eric Schmidt met with Hollande back in the fall to discuss the proposal, and the parties involved were supposed to resolve their issues by the end of the year (at least as far as the president was concerned), but so far, it sounds like little has been resolved. 

As far as Internet taxes go, while French regulators' plans may be designed to go after big companies like Google, where are the lines drawn? Will smaller players be affected as well? The very nature of the Internet is global, and that includes France. 

Is this a good idea on France's part? 

Chris Crum has been a part of the WebProNews team and the iEntry Networkof B2B Publications since 2003. Follow Chris on Twitter, on StumbleUponon Pinterest and/or on Google: +Chris CrumView all posts by