In times of Economic Crisis there is a focus on both the cost side and the income side of a Nation’s Budget. On the cost side most European countries are applying austerity policies to reduce the spending and the Budget Deficits. On the income side, with the absence of significant growth, legislators are constantly looking for new forms of taxation.
In recent times, the focus has been on the Stars. Many French celebrities have moved their fiscal domicile outside of the country with places like Switzerland, Belgium and Monaco representing close-by and easy choices for fiscal optimization. Legislators have proposed to penalize this behavior and in the case of Sports Stars, ideas have been circulating about the very right to participate in National Teams for the Sports Stars who moved their fiscal domiciliation to another country. The new President’s plans to set a 75% tax on very high incomes is further making the Stars tremble. Interestingly, at the time of writing, the US presidential candidate Mitt Romney seems to be attacked on similar aspects of Morality: can an American President decently have a Swiss bank account? Can a National Champion justifiably not pay taxes to that Nation?
And now to the Business Stars. Google, Apple, Facebook and Amazon are the biggest International Internet Stars in France and the newest tax invention has been nicknamed after the first among them: the “Google Tax“. Google have established their European Financial Headquarters in Ireland and invoice clients in France and in the rest of Europe from that entity. There is no additional tax on the media buy as that money leaves the country and French legislators are arguing that Google and other Internet players are not contributing sufficiently to the National economy they are operating in comparing to the benefits they gain. There is actually a French tax investigation under way examining whether Google France have paid sufficient levels of Corporate tax as well as Value Added Tax. More on Google vs French regulators in this article from the Guardian.
But the “Google Tax” is slightly apart from the individual cases under examination. It intends to attack the problem in a more systemic way so that the media buy itself is subject to an additional tax.
The first version of the tax from end 2010 would simply punctuate 1% of all the media buys directly in the country. Officially this proposed tax was abandoned during 2011 because it only affected advertisers based in France and not those based abroad. It would be harder to be French ecommerce selling to France than Ecommerce abroad selling to France… not good.
The new version of the tax, call it Google Tax II, would be applied to the networks selling advertising – based or not in France – at a rate of 0,5% up to 20 million and 1% of net media over that level. The details of the proposal is published by the Senat: http://www.senat.fr/presse/cp20120627c.html [in French] and includes additional initiatives.
According to the respected online journal, Journaldunet.com in a recent article [in French], both the IAB, the union of advertisers, UDA, and the branch of Advertising Networks, SRI, are strongly opposing this initiative. It may seem straight forward to be taxing ecommerce and advertising but it is certain to handicap French ecommerce. IAB argue that the entire internet ecosystem is based on advertising and that additional charges will weaken its growth potential.
The French often refer to one of Aesop’s fables: “tuer la poule aux oeufs d’or”, they say, referring to “killing the Hen with the Golden eggs”. Unilaterally taxing French advertising networks would have an impact on French ecommerce and make it harder to sustain growth. Sure, growth is close to 20% per year but more surely, France is way behind in ecommerce compared to the anglosaxon leaders of that game. Don’t chop that Hen’s head off, I’d say – the Rooster being considered as the national symbol for France we might as well avoid a Family Fight among the Fowls.
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