PARIS — When it comes to taxes, the French are pioneers. In 1954, they introduced the world’s first value-added tax. Since then, they have proposed or championed duties on all manner of other things, like online advertising, pollution, financial transactions and vacation homes.
Only a few weeks after the French Supreme Court rejected one new tax proposal — a 75 percent levy on incomes of more than €1 million, or $1.3 million, a year — an even more novel idea began percolating through the halls of the finance ministry last month: a proposal to tax the collection of personal data on the Internet.
Google and Facebook know that John Doe “likes” wine, is shopping for a Volkswagen and often e-mails Jane Doe. Soon, they might have to pay for gathering that information.
Does France really need another tax? As of 2009, French tax revenue was equivalent to 42 percent of gross domestic product, one of the highest burdens in the world, according to the Organization for Economic Cooperation and Development, the coalition of free-market democracies. The U.S. figure was 24 percent.
But Nicolas Colin, one of the authors of a report in which the idea of taxing data collection was floated in January, insists that the proposal serves an important purpose. Like other European countries, France has been frustrated by its inability to raise significant tax revenue from the billions of dollars worth of sales and profits that Internet companies, many of them American, generate in Europe every year. Meanwhile, despite so-called austerity measures, budget deficits remain large.
“Every government needs revenues,” Mr. Colin, a government auditor and technology entrepreneur, said in an interview. “If they can’t get them from the most profitable companies, then they have to get them from the rest of us — individual taxpayers and smaller, struggling companies.”
Internet companies like Amazon.com, Facebook and Google, along with a number of other multinationals, stay largely out of reach of tax collectors in large European countries like Britain, France and Germany by routing their sales through smaller countries, like Ireland and Luxembourg, where corporate tax rates are lower. The companies insist that such practices are permitted under E.U. law and international taxation treaties.
France and other countries have initiated talks aimed at changing those conventions, so Internet companies could be taxed in the country where a sale takes place, rather than in the location where the transaction is recorded. But that could take many years, with no guarantee of any change.
France, on the other hand, could impose a tax on data collection unilaterally and quickly, Mr. Colin said. Yet the prospects for his proposal are unclear. While the report was commissioned by the government, it is not an official policy document, and the finance ministry has yet to take a position on the idea.
On other issues involving the digital economy, the administration of President François Hollande has sent mixed signals. After threatening Google with a law that would have authorized publishers to charge the search engine for links to their Web sites, for example, the government backed down and accepted a negotiated deal that maintains Google’s existing business model, under which links are free.
The French data protection agency — which is known by its French initials, C.N.I.L. and is independent from the government — has been more forthcoming about the taxation proposal.
“Personal data are the fuel of the digital economy,” Edouard Geffray, secretary-general of C.N.I.L., told the French version of the online magazine Slate. “Given that, it would seem like a natural idea to envision taxing the use of them.”
While business models built on the promise of “Big Data” are proliferating, with established giants like Google and Facebook and a growing number of startups hoping to mine ever more detailed personal information to sell advertising or other services, so are concerns about the use of those data.
Article source: http://www.nytimes.com/2013/02/25/technology/french-tax-proposal-zeroes-in-on-web-giants-data-harvest.html?partner=rss&emc=rss
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