The 'Google tax' proposed in France has been pushed back by the country's government and will be introduced on 1 July, not 1 January, it has announced. The government said the delay would mean "more time for discussion with those concerned".
But guess what? The crucial twist with this story is that until 23 November, the government had been working out how to apply the tax to Google and the other online ad firms in the French market.
Until... they realised the tax could not be levied, because of the way Google is registered in Ireland as its primary base. So being based in Ireland means that not only does Google pay a minimal amount of tax, but that it is also dodging this French initiative. Not so much a 'Google tax' then ? but a tax on using Google.
Photo by Son of Groucho on Flickr. Some rights reserved
Worse, though, is that the government passed the legislation with an amendment that means advertisers, rather than ad platforms, will now pay the tax. Needless to say the scheme is deeply controversial, not least with France's small band of web startups. Companies trying to build their businesses through advertising will now be taxed for doing so, which will hit small firms particularly hard.
Senator Philippe Marini told France 24 that it was felt online advertising should be brought in line with traditional print and broadcast media, which already pay an advertising levy in France. "We wanted to avoid a distortion in competition between other broadcasting means and the web, and this is the only operational means of reaching this value chain ? though I am well aware this is not an entirely satisfactory solution."
In the same report, Pixmania executive director Ulric Jerome didn't mince his words, saying "we are paying the price for the fact that the state can't lay its hands on tax evaders".
Guillaume Buffet of the industry campaigners Renaissance Numerique added that only 2.1% of the French economy was made up of digital business in 2009, and many of those struggle in the first two years. "Even 1% tax could make the difference between being positive or negative, so this could be leaving a lot of online businesses in the red just as they were about to break even."
The government originally estimated it could raise ?27m from the tax, which would be used to promote and finance arts and creative projects, but at one point also suggested taxing ISPs, which would increase the figure to about ?50m. More recent estimates put that figure at between ?10m and ?20m.
Enders Analysis estimates French online advertising spend for 2009 was ?1.9bn for search, display and classified; the latter accounts for 40% in France compared with 20% in the UK. Of that, it says, Google's 90% share of search advertising helped it gross ?530m from French advertisers last year.
So what's the solution? The French digital industry is lobbying hard, and appears to have had some success with the six-month delay added, presumably so that the government can try to find some way to get Google to pay.
Whether it is fair to tax Google for its success is debatable, but taxing advertisers on the rebound ? and penalising small businesses trying to grow ? certainly isn't.
Source: http://www.guardian.co.uk/technology/pda/2010/dec/16/google-tax-france
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