As online advertising continues to grow rapidly throughout Europe, French senators this week approved a new tax law aimed at securing the government to a piece of the revenue pie.
Although the measure is popularly known as the “Google Tax“, it does not directly impact the Internet giant, which has based its advertising business offshore and out of reach of French tax collectors. Instead, the one-percent charge will be levied on all French-based companies purchasing online publicity services.
The measure is expected to become law in 2011 and generate between 10 and 20 million euros per year if it is passed by the National Assembly, as predicted.
Supporters of the tax say it will put online advertising on an equality footing with other media. Broadcast and print advertisements are already subject to taxation in France. Television advertising alone pumps roughly 70 million euros into government coffers annually.
But critics say the government’s plan fails to meet its original goal: to tax the French operations of internet giants such as Google, Microsoft, eBay and Amazon, which are located strategically in European countries with low corporate tax rates, such as Ireland and Luxembourg.