France Considering an 'Internet Tax' on Personal Data

France is considering a so-called "Internet tax" on data collection activities by Facebook, Googleand other technology companies. The proposed tax would put a financial value on the personal information scooped up by those firms and used for advertising and other user-based customization. Dues would then be calculated based on the amount of personal data collected, as measured by outside observers. The idea was proposed in a report on the matter commissioned by French President François Hollande delivered Friday, first reported by The New York Times.

Personal data is considered by some to be among the brightest possibilities for Internet-based economic growth. The report acknowledges this possibility, calling data the "raw material" of Internet business. The French report also argues that users of services such as Google or Facebook are, in effect, working for those companies without pay by providing them with their personal information. Many, however, see that information exchange as the "cost" of using the otherwise free services those companies provide.

There's an economic rationale behind the tax as well: France's technology sector is dominated by well-established American players that pay little in French taxes while trouncing local competition, aggravating some French business owners and lawmakers. "We want to work to ensure that Europe is not a tax haven for a certain number of Internet giants," France's digital economy minister, Fleur Pellerin, told the Times and other reporters in Paris on Friday. Google told the Times that it was reviewing Friday's report. "The Internet offers huge opportunities for economic growth and employment in Europe, and we believe public policies should encourage that growth," a Google spokesperson added.

Google, specifically, has been the subject of a two-year French investigation into its tax practices. Google and other American technology companies have been accused by French officials of dramatically reducing their taxes in part by placing their European headquarters in Luxembourg or Ireland, which have lower tax rates.

"It appears that Google, Facebook or others, who are located in France, are not submitted to the same conditions, as far as tax and [Value Added Tax] are concerned, as the French players,” Pellerin said in an earlier interview with Bloomberg TV. "That doesn’t set the right conditions for a fair competition." Google maintains that its tax practices are fully legal. “Google complies with tax law in every country in which it operates and we are confident we comply with French law," a Google spokesperson told Bloomberg.

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