* Study on tax reform in digital economy paves way for law
* France to work on national law that could hit Google,
* Also lobbying for change at international level
* Report calls for new taxes to be based on web user data
By Leila Abboud
PARIS, Jan 18 France plans to study different
measures to collect more tax from global Internet companies,
including a new type of levy on the personal data of web surfers
that the likes of Google and Facebook use to
In a 150-page report commissioned by the government of
Socialist President Francois Hollande in July, two experts laid
out a series of recommendations for measures at the national and
international level to limit technology companies' ability to
avoid tax legally.
The government said it would now evaluate the feasibility of
the various policies with the aim of proposing a law by year-end
to modify how global Internet companies are taxed in France. It
added that France would work with countries in the G20, the OECD
and the European Union to adapt international tax regimes to the
"new reality of the Internet economy".
"This report exposes the off-shoring of profits that is
practiced by some companies in the new economy, which will only
grow if nothing is done to tax their activities in France," four
French ministers said in a joint statement.
Tax experts said France may find - just as it did with its
attempt to impose a 75 percent income tax rate on millionaires -
that it is difficult to devise a tax that targets only those it
wants to but which a court does not find discriminatory.
Corporate tax avoidance has become a hot topic
internationally as governments struggle with large deficits in
the wake of the banking crisis.
France's planned legislation is in line with a push by
Britain and Germany, who want the G20 group of nations to make
multinational companies pay their "fair share" of taxes,
following reports of large firms exploiting loopholes to shift
taxation of their income away from where it is generated.
Australia released draft revisions to tax laws in November
designed to stop tech firms from shifting their income to
In France, among the report's measures is a call for France
to work with other countries within the G20 and international
organisations to refine the definition of where companies are
based for tax purposes, so as to curtail venue shopping for
lower tax rates.
A new system of taxation should also be devised, the report
argues, that allows individual countries to tax multinationals
even when they are not based in the country, basing levies on
the contribution of local residents' data to profits.
For example, if Facebook makes money from advertising sold
based on user data from French citizens, then it should have to
pay local tax on those profits.
"The major question is how do you localise the profits of
big Internet companies and attach them to the country where they
were generated?" Fleur Pellerin, deputy minister for the digital
economy and small business at the Finance Ministry, said.
"Tracking the collection and usage of personal data is one
of the approaches we are exploring but it isn't the only one."
Google and Facebook offer free services such as a search
engine and a social network to users and then sell targeted
advertising to companies based on the size of their audience.
Amazon and Apple have vast stores of
credit card and other information on their customers, which they
use to tailor product recommendations.
Seeking to value and tax these practices could prove
complicated for France to enact on its own and could be subject
to legal challenge if the rules were seen to be unfairly
targeting a few major companies, tax experts said.
Getting international consensus to modify tax treaties is
also likely to be a lengthy process. The OECD is also working on
draft proposals that member states will consider in January,
with the goal of then taking them to the G20 in February.
French politicians, like peers in Europe, are raising
pressure on web companies who they say collectively avoid paying
millions in value-added and corporate taxes using loopholes in
European Union laws and different tax regimes across the region.
French tax authorities have also stepped up enforcement of
tax avoidance strategies employed by big tech companies.
No. 1 Internet search engine Google has been investigated by
the French tax authority since June 30, 2011, when its Paris
offices were searched, and computers and documents seized.
Tax authorities are examining whether its practice of
charging French advertisers via its European headquarters in
Ireland led it to underpay taxes in France.
Google has said its practices in France conform with local
law and that it is co-operating with the authorities.
Internet retailer Amazon said it had received a $252 million
demand from the French tax authorities for back taxes, interest
and penalties in relation to "the allocation of income between