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France Proposes Internet Tax - An Old War resurfacing

France is proposing an Internet Tax which was reported in the New York Times. The proposal if it follows through will affect the landscape of internet governance in days ahead.

The Actual Report was commissioned by President François Hollande, which described various measures his government was taking to address what the French see as tax avoidance by Internet companies like Google, Amazon and Facebook.

The US has always maintained that the Internet should be a tax free zone as per the US Congress’s Tax Freedom Act 1998 (authored by Representative Christopher Cox and Senator Ron Wyden and signed into law on October 21 1998 by then President Clinton) which following expiry continued to be reauthorized and it most recent re-authorization (legal speak for extension) was in October 2007 where this has been extended till 2014.

The OECD and the EU have been holding the opposite view (Kurbalija,J. 2010)—see their Ottawa Principles where they find that there is no difference between traditional and e taxation that would require special regulations.

It followed that in 2003 when the EU introduced a regulation requesting non EU e commerce companies to pay value added tax (VAT) if they sold goods within the EU. The main driver or motivation was that non-EU companies (many of whom are US companies) had an edge over European companies as is apparent in an OECD Report.

What is interesting is in light of the pressure on the economic systems in Europe triggered by challenges in economies such as Greece, Spain, Italy and the reliance and pressures on the Euro aggravated by other external triggers such as food, energy and water crisis and even with the Indonesian and US Trade disputes will together with a host of other triggers have a cumulative effect that will force the outcome of tomorrow’s Internet and tomorrow’s regulations.

We are set to see some interesting turf war soon between WTO/ITU/EU/US.

Each country will ultimately exercise their sovereignty in how they regulate within their own turfs. For countries like France where their is high expenditure within their national budgets, in the midst of a depressed economic region will no doubt look for potential sources of revenue. Discussions on taxing the internet is not new, what will be interesting however is the “how” and to “what extent”?

This is set to shift the landscape of regulation in the near future.

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