France's Pellerin Eyes Digital Tax In 2014 Budget

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French Digital Economy Minister Fleur Pellerin has recently announced her intention to include plans for an Internet tax in the country’s 2014 budget.
According to Pellerin, the objective is to be able "to integrate something" into next year’s finance law. At a time when such effort is demanded from businesses and citizens in France, it is "extremely important" that certain multinationals, which have up to now been virtually exempt from taxation, are required to contribute in the different countries in which they generate their profit or turnover, the minister argued.
Underlining the need to "completely revise" existing tax concepts, given that current taxation is not at all adapted to the digital economy, Pellerin insisted that to avoid this "tax exile" it is vital to restore equity between actors, namely those who pay and those who do not. It is not simply a question of taxing the digital economy as a means of finding solutions for the rest of the economy, Pellerin pointed out.
Despite Pellerin’s resolve and determination to swiftly address the issue, the proposed timeframe appears rather ambitious, particularly given that there is no evident solution and in view of the fact that there is no consensus on any one particular proposal.
Last year, President of the French Senate finance committee Philippe Marini submitted a legislative proposal advocating the introduction of a tax on online advertising. Dismissing the idea at the time, Digital Economy Minister Pellerin maintained that the idea was simply not "ripe" at this stage.
On January 18, 2013, the French Finance Ministry unveiled details of a report on taxation of the digital economy, submitted by state councilor Pierre Collin and Government auditor Nicolas Colin.
Commissioned in July last year, the report "offers a detailed and striking vision" of the rise in the digital economy and the importance of "the exploitation of personal data" in this growing sector. The report exposes the problem of profit relocation or shifting by companies, warning that this phenomenon will only increase if nothing is done to tax their activity in France.
The report called for a new tax to be introduced as a matter of urgency, based on the amount of personal information collected by Internet companies such as Google, which is used to direct personalized advertising and other services to users.
At the time, the Government made clear that the idea of a national tax based on the use of personal data is to be explored in detail in parallel with other proposals that have already been in order to solve the issue, including notably the idea of taxing electronic trade.
Pellerin has repeated, however, that US Internet giants must remain the target of any proposed tax. The Government must ensure that the future levy does not merely serve to increase the fiscal burden on French actors who are already experiencing difficulties, Pellerin warned.