French president Nicolas Sarkozy has announced his government's intention to introduce a tax that will affect some of the biggest internet companies by taxing their revenue from advertising.
Google, Yahoo and Facebook are among those companies that would see their French tax bills rise if the tax becomes effective.
The idea is to levy a charge on the small text adverts that most websites carry. When readers click on the adverts on the websites, even they are operated from outside France, they would be taxed. So if a French user clicks on a link to an advert on Google's site, the French government wants to tax Google (headquartered in the US) based on any revenue earned on the adverts.
No other country is attempting to do anything similar at this time and this worries one adviser.
"Without international consensus there is reason to be sceptical [that the tax will be enacted], said Cyril Valentin of Freshfields Bruckhaus Deringer. "This is an isolated initiative from France and really, the taxation of e-commerce is yesterday's debate."
Even so, the report estimates that the new tax would earn about €20 million ($28 million) a year indicating the scale of this type of advertisement use.
The tax change is one of the recommendations from a government-commissioned report about how to encourage legal downloads of content and raise for the arts sector at the same time.
The Internet and Creation report (Création et Internet) was written by Patrick Zelnik, a music producer, Jacques Toubon, former minister in the French government (including Culture in 1993-1995) and Guillaume Cerutti, chief executive officer of Sotheby's France, the auction house.
Critics of the panel have complained that none of its members are specialists in tax or digital issues.
Google is unhappy with the possibility of a tax.
"We don't think introducing an additional tax on internet advertising is the right way forward as it could slow down innovation," said Olivier Esper, senior policy manager of Google France. "The better way to support content creation is to find new business models that help consumers find great content and rewards artists and publishers for their work."
Facebook is, for the time being, unconcerned by the announcements.
"We don't have a comment as we have not seen any proposals on this," said a spokesperson for the social networking company.
For now, the companies can relax as no draft legislation has been produced, but this could change soon.
"Sarkozy has a track record of being able to push things through quickly," said Valentin.
