France mulls Internet ad tax to pay for creative work

A woman walks past an advertisement of a mobile phone running Google Inc.'s Android operating system at a train station in Tokyo in this July 12, 2009 file photo.

PARIS (Reuters) - France could start taxing Internet advertising revenue from online companies such as Google Inc, using the funds to support creative industries that have been hit by the digital revolution, a newspaper reported on Thursday.

The proposal, put forward in a government-commissioned survey, is France's latest challenge to the virtual free-for-all for Internet content.

Google said in a statement late on Thursday that it does not believe an additional tax on Internet advertising is the way forward.

France has caused controversy in the past by introducing some of the world's harshest laws against online piracy.

The tax, which would also apply to other operators such as MSN and Yahoo, would put an end to "enrichment without any limit or compensation," newspaper Liberation quoted Guillaume Cerutti, one of the authors of the report, as saying.

It would apply even if the operator had its offices outside France, as long as the Internet users who click on ads or sponsored links are in France, the paper said.

President Nicolas Sarkozy has repeatedly tried to present himself as a defender of France's cultural heritage in the digital age, most recently calling for public projects to rival Google's plans for a massive online library.

Critics have noted that the issue of compensating authors is a complex one, given that many of the songs, films and texts published online these days are created for free by amateurs outside the cultural establishment.

Cerutti, president of Sotheby's in France, drew up the report with Jacques Toubon, a former minister, and Patrick Zelnik, a former music executive who has produced the songs of France's first lady, Carla Bruni-Sarkozy.

The report was given to the Culture Ministry this week. It was not clear if the government has a timetable to act on it.

The authors also suggest taxing Internet service providers to raise tens of millions of euros that would be invested in developing the online music business and other creative enterprises.

For example, they propose offering government-subsidised online subscriptions and expanding online publishing platforms, said Liberation, which obtained a copy of the report.

A Google spokeswoman said in an emailed statement that the company does not believe that "introducing an additional tax on Internet advertising is the right way forward as it could slow down innovation."

Google said that developing new business models that help consumers find content online was a better way to support content creation, noting that the company already has partnerships with many French publishers and content creators and that it paid 4.2 billion euros last year to partners around the world.

Yahoo had no immediate comment. Microsoft said in an email that it was waiting for a response from its team in France.

In recent months, operators and users have faced increased pressure to pay for content from online newspapers and books to movies. Under France's Internet piracy law, people who repeatedly download materials illegally will be disconnected from certain online resources and fined.

By Sophie Hardach; Additional reporting by Alexei Oreskovic in San Francisco; Editing by Matthew Jones)