By Gregory Viscusi
(Bloomberg) — France should start taxing Internet advertising revenue at Google Inc. (GOOG), Facebook and other online services, a report commissioned by the country's culture ministry said.
Funds raised from the levy could raise up to 20 million euros ($29 million) a year to help finance projects to boost online cultural content and to pay artists, the report said, listing five U.S.-based companies as the main payers: Google, Facebook Inc., Microsoft Corp. (MSFT), AOL Inc. (AOL) and Yahoo! Inc. (YHOO)
The effort would aim to put an end to "the endless enrichment without payback," Jacques Toubon, one of the authors of the report, was cited as saying by the newspaper Liberation. French President Nicolas Sarkozy said he would ask Budget Minister Eric Woerth to study how to implement the online ad revenue tax, according to a report by 20 Minutes.
The move may mark yet another attempt by France to rein in what it sees as the encroachment of online services on the country's culture. Last month, a Paris court asked Google to stop scanning French works for its digital library project in the country, a venture that Sarkozy said could "deprive" France of its "heritage."
The proposed tax "is an extremely negative sign for innovative businesses," said Olivier Esper, director of public affairs for Google France, in an e-mail. It "could slow down innovation. The better way support content creation is to find new business models that help consumers find great content and rewards artists and publishers for their work."
The recommended tax would be imposed on the ad revenue of companies established in the 27-country European Union, based on the online use of their services in France.
The report, which recommended a maximum rate of 2 percent, said the "principal difficulty" would be ensuring the tax is paid.
Patrick Zelnik, a co-author of the report, was cited by Liberation as saying that the so-called "Google Tax," would touch a miniscule part of the 800 million euros the Mountain View, California-based company makes in ad revenue in France.
The 69-page report carries 22 proposals, such as increasing spending on digitizing books, creating Internet portals to aggregate online content, cutting the tax for online cultural sales, and setting up bodies to ensure artists are paid for works downloaded from the Web.
The cost of the various proposals would be about 50 million euros in the first year, the report said.
Sarkozy also approved the report's recommendation that France's competition regulator review the online advertising market to assess Google's "possible dominant position," according to weekly magazine Challenges.
To contact the reporter on this story: Gregory Viscusi in Paris at email@example.com.
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