French President Pushes For ‘Google Tax’

President Nicolas Sarkozy has thrown his weight behind a plan being considered by the French government that could see foreign Internet firms such as Google, Facebook and Yahoo being taxed for doing business in France.

Known as the “Google Tax”, the controversial proposals will force foreign Internet firms to pay a new tax on their online advertising revenue in France. The proposals are aimed at helping to save French creative industries from the ‘free-for-all’ Internet culture. Specifically, the tax would be used to help fund legal online outlets for buying French books, movies and especially music.

The proposals are contained in a government-commissioned report that was submitted to the French president on Thursday.

The idea that the French Government could raise revenue from the advertising being seen by French Internet users was apparently was suggested by the authors of the “Creation and Internet” report commissioned last year by the Minister of Culture, Frédéric Mitterrand.

One of the report’s authors, Jacques Toubon (a former culture minister) told the Libération newspaper that the aim was to curb “the limitless enrichment” of the world’s leading internet players. His colleague on the report, Guillaume Cerruti, the president of Sotheby’s auction house in France, said the revenue would “go straight into the state budget”.

In essence, the French are proposing that Internet companies would be required to declare how much revenue they make from their online advertising activities in France.

“These companies are taxed in the country where they are headquartered, although they tap a significant part of our advertising market,” Sarkozy said in a speech late Thursday to members of the French music and publishing industries.

Sarkozy said that this distorts competition, and he also said that he would ask the French competition authorities to give their view of whether Google held a monopoly position in the online advertising market.

“All businesses should be treated equally,” he said. “It’s only fair.”

The authors estimate the tax could raise 10 million euros (£8.9 million) a year for the French creative industry.

While it is common for countries to impose tarrifs and taxes on imported goods when they reach a country’s border, in order to raise cash and to protect local businesses, it is controversial to say the least to tax a foreign business based on its actual bytes of data in a particular country, as opposed to imported physical goods.

However, the EU has warned the French Government that they would have to check any plan to tax advertising revenues and channel the money to the ailing French music industry, with them first.

EU spokesman Jonathan Todd, in a Press Association report, said the European Commission “would have to look at it under the state aid rules” to make sure that money raised by the state and handed out to private companies would not harm competition. However, France has a long history of ignoring EU regulation and directives.

In the UK, representatives of British media last year asked Google for money, claiming the search giant was creaming off advertising revenue without putting money into content.

France was also in the lead of controversial moves to protect content owners’ revenues by cutting off the Internet access of people persistently file-sharing