In a few months, two laws aimed at regulating e-advertising in France have appeared on the media scene and in the ranks of the National Assembly, one after the other. These two laws have in common that they strike a heavy blow to advertising on the internet in the French market.
What is it about?
The first, voted through by the National Assembly in December 2010 and included in the 2011 budget, is none other than the famous Google tax or Marini tax, which provides for a charge of 1% to be levied on advertisers «on the purchase of online advertising services».
The initial idea behind this law is based on the observation that a large portion of French investment in online advertising is spent with Anglo-Saxon players not subject to corporation tax in France. Indeed, many internet players, with Google at the forefront, choose to establish their European headquarters in the most fiscally advantageous countries, such as Ireland, to optimise their corporation tax and social security contributions, which is fair play.
However, the EU's principles of taxation deprive the French state of a significant source of income corresponding to advertising investments, investments which are, moreover, largely taxed across all media except the internet.
To compensate for this loss of revenue and on the principle of «fiscal neutrality of the advertising market», parliamentarians have decided to circumvent the taxation problem by levying a tax on online advertising services directly at the source, meaning from the pockets of advertisers.
The second is a transposition into French law of a European directive obliging website publishers to obtain the consent of internet users when placing cookies on their devices, with the exception of cookies necessary for navigation.
This law, which aims for greater transparency from website publishers and advertising agencies, should allow internet users to refuse the installation of advertising cookies on their devices. Thus, websites and agencies will have to inform internet users before placing cookies, for example by displaying a window on the site allowing the internet user to accept or refuse the cookie.
Two easily avoidable laws
In both cases, these laws will be difficult to enforce and, above all, easy to circumvent.
In the case of the Google tax, the largest advertisers in terms of ad space and keyword purchases will be able to easily move their billing services out of France, or even outsource their online advertising investments to a foreign subsidiary. The top internet advertisers in France in 2010, as published by the IAB, highlights a key finding: a significant portion of online advertising investment is made by multinational companies that have the means to optimise their purchases.
In the second case, the very definition of a cookie poses a real problem in terms of interpretation. Indeed, which cookies will be affected by this law and how can we verify that advertisers and ad networks are playing by the rules?
Given the evolution of technologies and internet usage, the parliament seems to be two carriages behind with this law, which only targets cookies.
Indeed, what about mobile advertising where ad networks like Apple's iAd can easily do without cookies to identify and track a mobile user? What about tracking solutions based on flaws in the Flash player that allow detailed behavioural information about internet users to be gathered without cookies? Finally, what about internet users' genuine desire to have to choose, with every page or site load, which types of cookies they accept and which others they refuse?
A hard blow for French Net Economy players
In both cases, this is a severe blow, directly dealt to the players of the Net Economy in France. These two laws inflict real damage on a sector that represents a part of our country's future and the jobs of tomorrow.
The immediate consequence is to penalise the competitiveness of French players by adding financial and technical constraints to only French companies that are already struggling to establish themselves on the international stage. Past and present governments have always recognised the importance of supporting innovative companies (creation of the JEI status, strengthening of the research tax credit system, establishment of competitiveness clusters, etc.), so why focus on online advertising today?
Even though it is obvious that hyper-targeting today poses real problems in terms of respecting users' privacy, particularly with the excessive use of retargeting technologies, only a commitment from industry professionals on tracking methods, data retention periods, or the ownership of collected data will truly change the situation and guarantee users respect for their privacy.
Similarly, online advertising revenues in France cannot indefinitely remain outside the control of the French tax authorities, but shouldn't the response be at the European level? Indeed, at a time when in Europe, countries like Ireland engage in tax dumping to attract multinationals whilst simultaneously calling for European solidarity to prevent their collapse, wouldn't this be the moment to revisit the discussion on tax harmonisation within the European Union?
