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Today’s Top Headlines




French Digital Council Rejects 'Google Tax'

by Ulrika Lomas, Tax-News.com, Brussels

31 May 2011

France’s National Digital Council (le Conseil National du Numérique – CNN) has called for the outright abolition of the government’s proposed tax on online advertising. According to the Council, maintaining the tax would be in total contradiction to the findings of the recent G8 meeting.

Alluding to the so-called Google tax as “discriminatory”, the advisory body warned that foreign operators would not pay the levy, while companies established in France would be subject to the controversial tax. In addition, the body emphasized that large companies with foreign subsidiaries would merely circumvent the provision by purchasing advertising space destined for French Internet users from abroad.

Defending its decision, the Council made reference to the McKinsey report, which examined the impact of the Internet on the French economy, and highlighted the fact that the Internet contributed to 25% of gross domestic product (GDP) in France last year.

Underlining its role of advisory body and its overarching aim of supporting and promoting the digital economy, the National Digital Council then alluded to the conclusions arrived at during the G8 meeting, namely to recommendations that the use of the Internet by individuals, companies and administrations be both encouraged and developed.

Opponents of the tax have also warned that the levy will merely serve to adversely affect digital investments in France, notably those realized by small- and medium-sized companies (SMEs), who do not have the necessary resources to advertise using traditional media.

In the light of the G8 meeting and given the advisory body’s views, French Industry Minister Eric Besson, responsible for the digital economy, called for a deferral of the tax.

Indeed, Besson has received backing from Laure de La Raudière, the MP responsible for the digital economy within the majority Union for a Popular Movement Party (UMP). Laure de La Raudière has submitted an amendment seeking to abolish the levy, which is due to be examined within the framework of the country’s supplementary finance bill in June, arguing that the tax is counterproductive as it taxes the digital economy, which is in full development.

Following the launch of the country’s new National Digital Council at the beginning of May, French President Nicolas Sarkozy announced his intention to place the issue of ‘digital taxation’ (la fiscalité numérique), the taxation of major global Internet companies, firmly at the top of the political agenda.

Underlining the importance of once again raising the issue of digital taxation, President Sarkozy stressed that it is not right that Internet companies conduct business en masse in markets such as France, where all of the sector’s infrastructures are financed by the state, while arranging their corporate structures to maximize tax efficiency.

Sarkozy suggested that there is a middle ground to be found "between nothing and excess" whereby fleet-footed Internet firms with little or no physical presence in their major markets could be made to pay more tax without discouraging the creation of new e-commerce companies.

While acknowledging that the subject of digital taxation is an extremely difficult and highly sensitive one, requiring an international dimension, President Sarkozy emphasized that it should not be a taboo subject.

Despite the French President’s renewed commitment and drive for the introduction of a tax on Internet companies, the French government’s efforts last year to introduce a tax on online advertising, ended abruptly following fierce criticism from the country’s Internet stakeholders, who argued that the proposed levy failed to meet its intended aim. The plans were eventually suspended until July.

Established following the signing of an official decree, France’s new Internet advisory body, CNN, was set up in order to advise the government on matters relating to the digital economy and its development.

TAGS: individuals | tax | business | commerce | gross domestic product (GDP) | e-commerce | France

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