Is there logic behind France’s rumored €1 Billion Google Tax?

Feb 5, 2014
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French Minister Arnaud Montebourg, in charge of ‘getting the economy back in shape’ (paraphrasing), is rumored to be putting together yet another ‘Google Tax’ that could hit the search giant with more than €1 Billion in back taxes on previous years. The minister, who was received by his fellow Frenchmen at LeWeb last December to the tune of a mass complaint of France’s anti-business positioning, has not formally proposed a tax, according to Europe1, and representatives from Google & the Finance Ministry have declined to comment; however, the tax would line up with previously proposed ideas.

The Problem

Say what you want about France and other non tax-haven countries, the Internet has proposed possibly one of the most difficult conundrums in the history of democracy. On the one hand, one of the founding principles of the European Union is that a company can be based in any member state and pay taxes there for revenue generated in Europe, so long as the revenue was generated in that country where they are based. On the other hand, self-service and online purchasing means that anyone buying Facebook Coins, Google Ads, Sponsored Twitter posts & other digital goods, are seamlessly purchasing that via their French chaise from an entity based in Ireland (or Luxembourg, or Switzerland, or Holland, and sometimes a combination there of).

So, how can France ensure that Google pays taxes for revenue generated by French citizens? A reasonable question to ask.

The Solution(s)

Many forms of the ‘Google Tax’ – a term used to represent a tax on Internet companies generating revenue from French citizens via European headquarters located, for the most part, in Dublin – have existed. A few years back, a tax on all digital goods bought by French citizens was meant to solve the problem; however, Google et al. passed the tax on to the consumer, and lobbying from large enterprises who exist on Google AdWords and the like crushed version 1.0 of the Google Tax in a matter of months.

Since then, the biggest fascination, highlighted by last year’s NSA surveillance revelations, have been on user data: and that’s where the most recent ‘Google Tax’ finds its home: taxing Internet companies who house French user data outside of France. On the one hand, France can easily claim that, for the protection of citizens, Google needs to keep user data inside the Hexagon – they would not be the first European country to enact such a law, as Holland already requires administrative data to be stored locally – however, lobbying by American companies to the US government to squash the bill had apparently solved this issue already.

And the €1 Billion? That’s just in retro-active taxes on previous years

You can’t blame countries like Germany & France for wanting to recuperate taxes on Internet Companies. A sales tax on physical goods is meant to keep businesses in check on such revenue, and the Internet has circumvented this. To date, there is no solution for the European Union, other than splitting the Euro up, aligning taxes across all countries, and other impossible absurdities.

In Google’s defense, and to attack the Government, the company has:

  1. Become a figurehead for a larger problem, and has repeatedly stated that they pay all legally required taxes
  2. France is only making an enemy of a company that, in almost every other country, has become a friend, supporting the growth of the digital economy

Perhaps the media is to blame a bit for the propagation of the term ‘Google Tax.’ The reality is that any such tax would equally affect Twitter & Facebook, along with a handful of other Internet giants.

For now, the tax is just a rumor, A rumor that is a symptom of a very real problem. And that problem is taxation on Internet companies. Expect this problem to be solved in the next 10 years.

Photo via The Telegraph