France Considers “Google Tax” on Internet Advertising

French Google TaxThe French Government has proposed a tax on websites such as search engines which use pay-per-click adverts. Although the scheme appears to target major companies such as Google, Yahoo, Bing, and Facebook, it has the potential to affect any website which raises revenue from advertising.

Money raised by the tax will be plowed into creative industries which have been weakened by the Internet. This could include the creation of legal online channels for books, music and video distribution. (France has some of the toughest anti-piracy legislation and new laws now offer authorities the power to disconnect and fine repeat offenders.)

One of the report’s authors, Guillaume Cerutti, said that the tax would end “enrichment without any limit or compensation.” The authors hope to get Europe-wide support for the proposals but that it was “legally and technically” possible for France to go it alone. Internet advertising revenues in France are estimated to be over $1.1 billion and the scheme is expected to raise $70 million from companies whether they have a French office or not.

Of course, this is another in a long line of uninformed and technically inept strategies from Governments around the world. The story makes the headlines, sounds great to the majority of voters, but has little grounding in practicality and could ultimately result in an overall net loss.

The first issue: how can the Government monitor sponsored links when they are clicked by French users? ISPs could be forced to implement link monitoring software but that’s a huge and costly undertaking. In addition, how would revenue amounts be associated with each link? Click costs can vary from a fraction of a cent to hundreds of dollars.

Tax collection would be the next hurdle. How many foreign companies would pay a tax bill from a country where they have no office or server facilities? If the legislation is applied fairly, the French Government would need to send tax bills to hundreds of thousands of companies with little chance of recouping the administration costs.

The legislation seems intent on hitting the large US-based Internet corporations. The least expensive option would be to collect additional money on profits generated by their French offices. That will almost certainly backfire; global corporations are adept at moving money to countries which attract the least amount of tax.

It appears the French Government has forgotten the Internet is a global network. Google, Yahoo, and Microsoft all have French offices, but they can be shut down if the costs outweigh the benefits. The lost jobs and income tax receipts could have a far greater long-term impact on the French economy.

Olivier Esper, Google France’s general director, called on the government to “favor co-operation rather than opposition between the worlds of Internet and culture via the logic of taxation.”

Does the French Internet advertising taxation plan have any merits? Comments welcome…

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  • unformatik

    lol, such as Google, Yahoo, Bing, and Facebook are US based, how to tax them
    effffff

  • http://www.starsites.co.za Jacotheron

    When will authorities realize that legislation like this does not work?
    Here in South Africa, the authorities also jump on bandwagons (even though it have been proven that it will not work) and try to drive them.
    In my opinion: a waste of good trees and money.

  • http://www.billbolte.com bbolte

    An “lol” or a “rolleyes” emoticon aren’t strong enough symbols for what this article did to me this morning.

  • http://www.redshift.gr papaman

    is that speculations? I don’t see any source or reference.

  • http://www.optimalworks.net/ Craig Buckler

    Hi Papaman.

    I wish it were speculation. There are several hundred articles circulating the net but I didn’t start the story!

  • Franck

    I’m writing from France. I won’t argue in the favor of this Government, which is pecularly deaf and blind when it comes to IT…

    Anyway, it’s not thousands of companies and websites that would be concerned with this tax (if I’m not wrong).
    The idea is to tax major internet companies that sell ad links. The tax wouldn’t concern site owners who earn some money publishing sponsored links on their pages. It would solely concern companies like Google or Yahoo that make huge profit selling these links.

    I could see no reason why google wouldn’t pay tax in countries where it is doing business.
    When Microsoft sells a retail copy of windows in France, Microsoft pays tax. Why would it be different in other cases : a company sells its products in France, it should pay some tax in France.
    It would just be fair…

    Now, there is no technical curbs to such a fiscal measure. If the French Government want to know how many sponsored links were clicked from France, where’s the problem.
    If google (yahoo, whatever…) wants to stop sponsored links in France, it’s easy to prevent them displaying on the screen of French ISP users…

  • jnbdz

    @Franck Google is not sailing the services, they also do not charge for it to it’s users.

    I think this is a case of big government trying to suck even more money out of businesses.

    Let me also add that Google services are good for the French economy and business. Government should encourage business. Not tax them to discourage and this is what this tax is. We don’t need more government, but more business like Google. They actually do things that are useful.

  • steve

    Two words for France: Good Luck.

    Just to make sure they understand, bonne chance.

  • http://www.optimalworks.net/ Craig Buckler

    Thanks Franck.

    Even if it only hits companies selling ad links, that will still affect thousands of organisations. Small businesses will certainly be affected. The additional costs would be passed on to the advertisers and websites showing adverts would not receive as much revenue.

    And what if Google scrapped their AdWords in France and replaced it with another company’s system? Google would not need to pay the tax and, if the advertising system is based abroad, the French Government would have difficultly collecting any money. Although Google’s advertising income is still taxable, it wouldn’t incur the additional charge.

    As with many of these Government schemes, it unfairly hits certain industries, is difficult to implement, costly to collect, and easy to subvert.

  • nachenko

    IF YOU DON’T UNDERSTAND WHAT IT IS, PUT A TAX ON IT.

    Conan’s strategy adapted to XXI century government.

  • waji

    What about USA? Do they have any Tax on Search Engines Ad Links?

  • estrahon

    This annoys me just as much as the “Amazon tax”. Didn’t Amazon pull out on everyone that was an affiliate in that state? France may not be able to tax Google directly but watch them try to get the affiliates there, that’s going to hurt BIG time. If the government wins there this will give every other country on the chance to jump on the bandwagon and we can all say goodbye to Adsense. No Adsense no Gmail and the like.

  • Anonymous

    _this_

    “Of course, this is another in a long line of uninformed and technically inept strategies from Governments around the world. The story makes the headlines, sounds great to the majority of voters, but has little grounding in practicality and could ultimately result in an overall net loss.”

    Seems to be at the root of most of the problems we’re experiencing in the world today.