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

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

6 Responses

  1. Avatar
    Pierre-Olivier Dybman

    Come on …
    You KNOW that everything purchased in France should be taxed as a revenue in France if the company has settled down there.
    There has been investigatio ndirectly in the French office of Google. This is just fairness. You are on a market, you pay tax there. That’s what Microsoft do, why wouldn’t Google do it?

    BTW, USA is also investigating Google for the exact same reason (and even considering to change the laws to make them more tough).

  2. Avatar
    Chris Hartwig

    Microsoft has probably paid 50M€ in revenue taxes… and Google should pay 1Bn€ ?
    That’s pure bullshit: they go after Google because it’s easy, not because it’s right.

  3. Avatar
    Eric

    Montebourg is an imbecile who hates US businesses (remember Yahoo!/Dailymotion?). He likes and France, despises globalisation which also means he does not understand Internet.

    The 1-billion figure in itself is ridiculous. I am really unsure Google even shivers. But, maybe it’s leverage for something else. I doubt it will work. Google could operate out of France is constraints are strong.

    There is little intelligence in this Coq move. I’d rather see him attract more foreign businesses in France, but then tax lack of stability may be a no-go for lots of investors.

  4. Avatar
    Mikael Gramont

    As much as I want to understand the rationale here, and as much as I support businesses paying taxes, I don’t get it. Apparently this is not about paying taxes on ad revenue, it’s about paying taxes for hosting French user data outside France? That sounds crazy. Is €1 billion the price the government places on its citizens’ data privacy? If they don’t want the data stored outside France, why not ask for that instead of money?

    I look forward to hearing more of this, but it sounds pretty strange or disingenuous so far

  5. Avatar
    Tarek

    And if Google said listen guys, I no longer want to provide my services and product to a Communist country like France, therefore I’m force to remove all French site from Google, until you can offer us a non-communist tax rate bracket 🙂

    Yes for the Harmonization, let’s adopt the UK tax system, (20% max) and let’s get rid of the RSI and the URSSAF in the process!

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