France Drops Plans for ‘Google Tax’

PARIS — French legislators have dropped plans for a tax on online advertising that had come to be known, somewhat misleadingly, as the “Google tax.”

Philippe Marini, a lawmaker from the UMP party of President Nicolas Sarkozy, late on Wednesday withdrew legislation seeking to reimpose plans for the tax, only days after the National Assembly had rejected it.

The measure, which had been approved by the Senate, would have imposed 1 percent levy on online advertising expenditures in France. It was aimed at addressing the French government’s concern that foreign Internet companies like Google pay little or no tax on their earnings in France.

Yet support for the legislation flagged after critics pointed out that it would have had little effect on Google, because the company sells advertising aimed at French users via its subsidiary in Ireland, where tax rates are lower. Instead, French Internet companies complained that they and their advertisers would have suffered — thereby holding back the development of a homegrown French Internet economy.

After the rejection of the measure in the Senate this week, ASIC, a trade association for Web companies, including imports like Google, Microsoft and Ebay, as well as French players like Dailymotion, praised what it called a decision to “save the French digital economy.”

Often seen as suspicious of the Internet, the French government in recent months has been emphasizing the importance of digital technology to the overall economic development of France.

In May, Mr. Sarkozy convened a meeting of Internet company executives in Paris on the eve of the Group of Eight summit meeting in Deauville, France. Also this year, he established a National Digital Council, which includes industry representatives, to advise the government on technology-related issues.

The council has recommended further study on the issue of taxation, in which the borderless nature of the Internet can complicate government efforts to raise revenue at the national level. It called for the issue to be addressed at the European Union level.

The proposal for the “Google tax” had been supported by organizations representing content creators and other copyright owners, which noted that revenue from taxes on television advertising revenue is used to support film and television production in France.

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