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France may soon become the first nation to tax the internet

Taxing the internet has been a hotly debated proposition that is widely criticized by citizens, economists, and communications experts.  Still the government is always looking for new sources of income to pay for the escalating cost of military and social programs, so the issue enjoyed a long debate in the U.S. Congress, with an extension of the current tax ban passing only recently after much internal arguing within both parties.

Now French President Nicolas Sarkozy, oft labeled an iconoclast, has proposed taxing the internet in France to finance state-owned television.  The scenario provides the interesting reversal of a government looking to give television special privileges at the cost of internet, in this age, where usually the internet is constantly stealing TV's thunder.  President Sarkozy gave the announcement at a press conference from Paris's Elysee palace.

The President of France laid out an extremely controversial program to encourage state run television.  The first step, he says, is to "consider the total suppression of advertising on public channels" via legislation making them more viewer friendly.  In order to compensate for this loss of revenue, he suggests "an infinitesimal sales tax on new communication methods, like internet access and mobile telephony."

Audrey Mandela, founder of the independent London consulting agency Mandela Associates, is among the experts who say that gaining the support of the French legislature and the French people for such an initiative would be very tough.  She says, "Generally speaking, taxing the Internet is considered a bad idea, and a potential brake to net use and development, but without knowing the details of the French proposal, it's difficult to say how problematic an Internet tax there would be."

French internet use is growing by 14% per year, with a big 22% increase per year in high-speed connections.  Mandela suggested that a tax may cause some new users to give up the internet, hurting communications companies.  However, other users need the internet and simply could not give it up, so it’s not an option.  She explains, "The people most likely to balk at tax-increased Internet prices are new users who figure if it's getting more expensive, they can keep doing without it.  These days, there just aren't many people who could respond to higher Internet prices by saying, 'Forget it, I'll just do without the net from now on.  Ten, even five years ago, that wasn't necessarily so. Today, who has the choice?"

The likely proposal is estimated to be a flat tax per-user to Internet Service Providers (ISPs).  There are 16.1 million accounts in the nation, so a flat monthly surtax of one euro would raise roughly $290 million USD for the program (about 25% of the $1.2 billion USD in revenue from commercials on public TV). 

Some say the tax could be even higher, as France has very cheap internet service rates for Europe.  The average monthly bill is a mere $37, which is around 37% lower than the average of its neighboring countries.

Some critics point out that the plan will lead to job cuts in State TV's departments.  State TV official have come out strongly against the plan.  They point out that President Sarkozy's plan will send the over a billion dollars in advertiser revenue into the pockets of privately owned TV networks, including market leader TF1, owned by Martin Bouygues who is a close friend of Sarkozy. 

While some may simply say, "c'est la vie", this unsavory personal connection and the general implications of taxing the internet have many in France up in arms.





"There's no chance that the iPhone is going to get any significant market share. No chance." -- Microsoft CEO Steve Ballmer
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