Tax Analysts Blog

The Google Tax is Asinine

Posted on Jan 11, 2010

I do not hate the French. Honest.

France is one of my favorite places to visit; the country is undeniably beautiful. I've previously been accused of being a cheese-eating, cognac-sipping, Francophile. I even have Serge Gainsbourg tracks on my ipod. So let me say from the outset that my objective here is not to engage in Frog bashing. Rather, my purpose is to decry an idiotic tax proposal emerging from the French government.

President Nicolas Sarkozy recently commissioned a report from the French Ministry of Culture on methods to preserve the country's unique social heritage, which apparently is being threatened in the age of the Internet. It seems the youth of France are hooked on YouTube, Facebook, and Twitter -- just like their peers in every other country. French teenagers would rather text-message each other than study Robespierre or Renoir. In short, they are normal teenagers. But some people in the French government have a problem with that. They see the Internet as the main culprit, and a foreign interloper at that.

We Americans view the web as a tool for human progress, but the French government views it as a cultural weapon of mass destruction. By bridging diverse human populations, the Internet is homogenizing tastes, trends, and social awareness. Most French people under the age of 25 do not know the lyrics to La Marseillaise, but they've all downloaded Jay-Z's latest rap video to their smartphones. The Internet, it seems, is making the French less French.

This encroachment has gone too far for some. The Ministry's report, released this week, proposes taxing online advertising revenue in what's come to be known as the "Google Tax". This is an additional surcharge the French government would layer on top of the current system of income taxes and consumption taxes. It's not like they don't already tax all sorts of economic activity over there -- now they want to tax the fact that a website or search engine offers ad space. The tax would be triggered every time any French user of the Internet clicks on an advertisement or sponsored link.

This plan gets my vote for the stupidest tax idea of the newly commenced decade. Companies like Google have French subsidiaries that earn millions of euros in ad revenue every year; they already pay French taxes on that income. This additional tax is simply a means of punishing U.S.-parented firms for their innovation and commercial success. It also fulfills the old cliche about European bureaucrats who, when confronted with an obstacle, stand devoid of any intelligent response other than to tax the hell out of what they don't like. (To be fair, the Europeans have similar cliches about American politicians which involve the propensity to start unnecessary wars -- one can debate which is the greater vice).

If you believe the Ministry's report, a secondary purpose of the tax -- beyond preserving the citizenry's diminishing Frenchness -- is to compensate published authors and recording artists who lose out on royalty income as a result of online piracy. A co-author of the report, Patrick Zelnik, is the founder of a musical label whose recording artists include Carla Bruni Sarkozy, the president's wife. No conflict of interest there, is there? (Note: Madame Sarkozy should stick to her modeling career; her singing stinks.)

The larger point is that Google is not Napster. There's no evidence that the online ads which France wants to tax are violating anyone's intellectual property rights. There's no linkage between the incidence of the tax and the alleged harm for which redress is sought. That's the definition of bad tax policy. We will also ignore the fact that the tax is almost certainly unenforceable.

Let's be honest. The Google tax is a money grab; and one that's fueled by a strange jealousy. A few years ago the French government launched a massive public works project to digitize the world's books. The project was overly ambitious and entirely unnecessary. So far French taxpayers have sunk €700 million into the project. Turns out the private sector -- more specifically, the American private sector in the form of Google -- is beating them to the punch and earning a handsome profit while they're at it. France's lumbering public works agencies cannot possibly compete with, dare I say it, the Yankee ingenuity found in Silicon Valley. The French are smart enough to know this.

If you can't beat them, tax them. Sacrebleu!

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