Scrutiny of Google Delays French Taxes

December 16, 2010 Taxation in France

The duckies invade GoogleA new study of Google’s dominance of the online advertising market in France has led the French Government to delay its upcoming online advertising tax.

On December 16th the Budget Minister of France Francois Baroin announced that the country’s upcoming tax on internet advertising could be delayed. The Minister stated that the postponement will allow the greater time for the government to hold negotiations and discussions with local telecommunications providers and businesses, in regards to how the tax should be implemented and monitored. However, industry analysts have suggested that the delay is related to the French Government’s recent inquiry into the internet company Google.

Earlier in 2010 it was announced by the Government of France that a new tax on internet advertising would be instated on January 1st 2011. It was planned that the tax would be levied at a rate of 1 percent of the net spending on internet advertisement by companies based in France. The levy was expected to raise approximately EUR 20 million, the majority of which would be spent on promoting cultural content and financing anti-piracy projects.

Local industry analysts have claimed that the delay is most likely linked to a recent report regarding the prevalence of Google in the France’s online advertising market. On December 14th the French Competition Authority (FCA) issued a report on the internet search and advertising giant Google, claiming that the company holds an approximate 90 percent share of the online search advertising market in France. The report has spurred a revision of potential tax revenues, with estimates being increased to almost EUR 50 million. Analysts anticipate that the French Government now wishes to renegotiate with the advertising industry, and in particular with Google, in order to avoid any potential contention or backlash due to lowered industry revenues.

Google representatives have already responded to the investigation and tax delay, saying that French authorities took too narrow a view while examining advertising. They claimed that there are numerous forms of online advertising that a company may choose to take, and it is unfair to concentrate on Google’s own AdSense program. They also stated that the 1 percent tax would be cumbersome and that the Government should concentrate on encouraging innovation among businesses instead of simply instituting a new levy.

Photo by Yodel Anecdotal