France’s war on Google hots up with new Internet advertising tax

The French Government has released a report calling for a tax on online advertising revenue to fund subsidies for French culture. This would include subsidies for newspapers, art, music and other products struggling in the digital era. The media has dubbed it the “Google Tax” as the Silicon Valley search engine giant holds the dominant position for search in France. The report’s author says the plan would likely target other big players such as Microsoft and Yahoo (some English reports also say Facebook is included, but this is disputed by French media).

(photo by mathias poujol rost)

The government commissioned the report after complaints from media companies that aggregators such as Google are getting a “free ride” on their content. The report called “creation and the Internet” was an outcome from Culture minister Frederic Mitterrand’s new baby called ‘mission Zelnik’. The mission takes its name from Patrick Zelnik, CEO of independent music label Naïve, and other members include Jacques Toubon, former minister of culture and Guillaume Cerutti, CEO of Sotheby’s France. While their report had 22 recommendations on matters including increased spending on digitising books, creating Internet portals to aggregate online content, cutting the tax for online cultural sales, and setting up bodies to ensure that artists are paid for work downloaded from the Web, it is the “Google Tax” that has hogged the headlines.

Details are sketchy about how it will work but the idea is France would place a tax of one or two percent on all online advertising revenue to raise 10 to 20 million euros. Silicon.fr (in French) wonders how online music sites would make the proposal work and says the Zelnik report proposes a move to collective management of music rights. The Society of Authors and Composers (SACEM) says the proposed solution only partially meets their requirements and says web2.0 services such as Youtube, Facebook and Myspace should also contribute to the scheme.

The idea has been rejected by the big internet firms. Critics say the tax would be difficult to implement and Google says it could slow down innovation. Google claims their partnerships with publishers and content creators has distributed 4.2 billion euros worldwide last year. “The better way to support content creation is to find new business models that help consumers find great content and rewards artists and publishers for their work,” said Olivier Esper, senior policy manager for Google France.

The move is part of a French trend to shackle elements of the Internet. In October France introduced legislation to cut Internet access from illegal downloaders. Under the law, a new agency will send out an e-mail warning to people illegally downloading films or music. A written warning is sent for a second offense in six months and after a third offense, a judge can order a one-year Internet rights suspension or a fine. President Sarkozy was happy with the legislation but Reporters Without Borders called it “a serious blow to freedom of expression on the Internet.”

Sarkozy also took on Google over its plans to digitise the world’s books. Portraying himself as a defender of French culture in the digital age, Sarkozy’s concern was the project would “strip France of its heritage”. He launched a counter-proposal for a French firm to scan the contents of the country’s libraries. Sarkozy’s call was echoed by Prime Minister Francois Fillon who said France would not accept another cultural industry “threatened by looting.”

It is easy to dismiss such tinkering as French “cultural arrogance”. But France has the right to take measures to ensure its vital and diverse culture is not reduced to an Anglophone add-on. Other countries are realising the invisible hand of the US-dominated market does not necessarily lead to good outcomes and local culture is threatened as much as local economies. While Google’s ambitions are, in the main, admirable, France is right to question its outcomes, if not its motives. If being digital means being democratic, then others should have a part to play in the brave new world, not to mention have access to Google’s enormous profits. If the levy puts an end to “enrichment without any limit or compensation”, it will be no bad thing.

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