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France considers tax on data collection in broader effort to capture revenue from web giants

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French Parliament (Shutterstock)
French Parliament (Shutterstock)

As part of its effort to raise more funds from web giants like Google, which are accused of using loopholes to avoid paying taxes in the country, France is considering a new measure that would tax the collection of personal data from users. France has been working on legislation to make web companies pay for the use of French networks, but as Reuters reported earlier this month, lawmakers backed away from the legislation in order to have a commission study the issue. The new tax measure isn't a guarantee — it resulted from a government commissioned report, and doesn't yet have approval of the French government — but it shows the country's creativity in looking for new sources of revenue.

The measure shows France's creativity in looking for new sources of revenue

As originally reported by Les Echos, the proposal would create an incentive-based tax system that would encourage companies to respect privacy rights and other virtuous behavior, and give the French government more leverage in future negotiations. There's no solid timetable for the measure's passage, but if it is ratified, it would be included as part of the country's 2014 budget.

The effort to tax internet companies that operate in France isn't the only vector the French government is exploring for new revenue; as Le Monde reported on Friday, the country has also been eyeing a tax that would force companies like Google to pay for links to content like newspaper publications — but it's having difficulty coming to an agreement on that tax. Despite the setbacks, the country seems determined to extract new taxes from companies like Google, which has been accused of avoiding tax by several European countries.

Google earns an estimated $2 billion per year in France, but pays almost no taxes

As The New York Times reports, Google earns an estimated $2 billion per year in France, but pays almost no taxes: a fact that has upset French regulators. Other European countries are similarly upset, with Google, Amazon, and Starbucks facing an inquiry from UK legislators over alleged tax avoidance. Evidence of this seems clear-cut; in 2010, Bloomberg detailed tax schemes utilized by companies like Google and Microsoft that transfer income between subsidiaries in Ireland, the Netherlands, and the Bahamas.

In France, both the link tax and the proposed data collection tax are part of a broader debate about net neutrality. As Reuters reports, a decision on the broader issue — whether web companies should pay for the traffic they serve to French ISPs — is expected to be made late next month.

Amar Toor contributed to this report.