France eyes 'Google tax' on Internet ads

A French government-commissioned report proposed "Google tax" on online advertising as well as Internet providers to aid creative sectors, such as music industry, which are struggling to adapt to the age of downloads.

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The proposal was one of several in a government-commissioned report following complaints by media companies that Internet giants such as Google are profiting from their content for free.

The report recommended ways to boost the availability of cultural material online while also protecting artists' and the media's intellectual property.

It suggested taxing online advertising as well as Internet providers and using the revenue to aid creative sectors, such as the music industry, which are struggling to adapt to the age of downloads.

The levy could raise up to 50 million euros (70 million dollars) this year, according to the plan.

The report's lead author, record producer Patrick Zelnik, said the tax would take 'a small percentage' of Google's online ad revenues, which he estimated at 800 million euros a year in total, according to Liberation newspaper.

He dubbed the plan a 'Google tax' but said it could also target other big Internet players such as Microsoft, AOL, Yahoo and Facebook.

President Nicolas Sarkozy did not comment specifically on the tax proposal, but said that when big Internet companies made money from online advertising in France, but avoided paying tax there, it distorted competition.

Speaking on Thursday, he backed the report's call for a decision by French competition authorities on the dominant market position of big online firms.

Google France said it hoped the government's plans would lead to innovation rather than new taxes, according to a statement from its public affairs director Olivier Esper.

'There is an opportunity here to promote innovative solutions, rather than extending the attitude of opposition between the Internet world and the cultural world, for example through the approach of taxation,' Esper said.

The digital media think tank Renaissance Numerique, whose members include business leaders, said the tax proposal penalised advertisers unfairly.

'Neither online advertisers nor Internet service providers are robbing artists,' said its co-president Christine Balague in a statement. 'Quite the contrary -- they are taking part in ... bringing consumers and artists together.'

Quadrature du Net, which describes itself as a citizens' rights group for the digital age, said the plan would make all taxpayers pay for 'out-of-date businesses' and make a 'scapegoat' of Internet providers.

Zelnik's report also proposed public subsidies for a voucher card system to buy music files online, so as to encourage legal means of accessing content via the web.

Sarkozy voiced support for this measure, saying he hoped the card scheme for young people would come into operation by the summer.

The SACD society of authors and composers said it was 'satisfied' with the proposals which would 'encourage and stimulate the legal availability of works to the public.'

French media companies have complained their online material is being used for free via services such as California-based Google, the world leader in Internet searches.

The report followed a government reform that came into force this month to punish users for illegal downloads.

But it also taps into the issue of cultural autonomy amid fears in France of the growing might of Google and other Internet giants.

Taxing online ads 'seemed inevitable if we want to preserve cultural pluralism and prevent ... the never-ending development of two or three world players,' Zelnik was quoted as saying by Liberation.