France is First in DSM and Other Related News

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On 23 July, the French national legislature passed an act implementing a new “press publishers’ right” —for European Union-based newspapers and news agencies— essentially authorizing the levying of a license fee on news republication by such platforms as Google (who calls it a tax). This anticipated development comes directly out of a section (Article 15) of the Directive on Copyright in the Digital Single Market passed by the entire European Union this spring.

The rationale behind this license fee is to recapture a portion of the newspapers’ ad revenues, believed lost to search engines ( Google ) and social media (Facebook and Twitter, to name two), due to their practice of reusing —for no payment— news stories originally found on the publishers’ own sites. The newspapers sought relief from the European legislature for this perceived unfairness, and in this spring’s Directive, they received it. In 2013 and 2014, Germany and Spain had attempted similar measures on their own, but were not successful in weathering the wrath of Google News; although a German lawsuit brought by a newspaper collective against Google continues, the publishers in both countries themselves withdrew their own claims lest they lose what publicity, and what little revenue, links from Google were delivering to them.

In terms of the Directive, what the French legislature has now done is “transposed” one (of more than 30) articles into French national law.  (All the articles of the Directive are required by EU law to be transposed into national law in all Member States by June 2021.)

And In related news…

Earlier in July, the French legislature also passed a first-of-its-kind “digital services tax” which may have wider and more long-lasting implications than the creation of the press publishers’ right to license their works for online use. When implemented, the new tax will collect revenues on transactions processed by Google, Apple, Facebook and Amazon, among many other companies —when these transactions initiate from users physically located in France. This change in policy represents an attempt to update the French tax system in the context of a global society increasingly reliant on e-commerce.

Spain may soon follow this French initiative, and it is being discussed in other countries as well.

In a New York Times column,  tax-law Prof. Lilian V. Faulhaber of Georgetown University points out that these moves are part of a trend:

The French tax is not just a unilateral move by one country in need of revenue. Instead, the digital services tax is part of a much larger trend, with countries over the past few years proposing or putting in place a veritable alphabet soup of new international tax provisions. These have included Britain’s DPT (diverted profits tax), Australia’s MAAL (multinational anti-avoidance law), and India’s SEP (significant economic presence) test, to name but a few. At the same time, the European Union, Spain, Britain and several other countries have all seriously contemplated digital services taxes like the one just passed by France.

This is an important observation. France’s move is indeed not an isolated one; it points to a deeper issue about the difficulties of commerce in an increasingly digital age.  As a bit of evidence that the French government is not alone in worrying about the issue of losing tax revenue (while requiring domestic companies to bear the unfair burden of outsiders not paying a tax), it is worth noting that a very similar issue has arisen within the United States itself; in the 2018 case of South Dakota v. Wayfair, Inc., the U.S. Supreme Court upheld the right of individual states to require out-of-state vendors which have no presence in the state to collect sales tax on transactions with in-state customers. Faulhaber goes on to say,

[These laws are] designed to tax multinationals on income and revenue that countries believe they should have a right to tax, even if international tax rules do not grant them that right. In other words, they all share a view that the international tax system has failed to keep up with the current economy. The general outlines of the current system originated in the early 20th century, and all of these recent proposals and provisions suggest that the current system is out of date and needs to be updated for a world in which companies can make significant amounts of income without ever being physically present in a country or selling any tangible goods.

Isabel Gottlieb, writing for Bloomberg, highlights the activities within the scope of the tax:

“The tax targets a company’s French revenue from digital advertising, sale of user data, and third-party online platforms that connect buyers and sellers. The French government expects the tax to bring in about 500 million euros per year, finance minister Bruno Le Maire said when he introduced the tax late last year.”

The BBC, in a post entitled “France Passes Tax on Tech Giants despite US threats,” reports that the US has already registered its opposition through U.S. Trade Representative Robert Lighthizer, and has launched what is known as a “Section 301” inquiry — a U.S. domestic trade-investigation process that is seen as likely to lead to retaliatory tariffs being imposed.  In that same report, Dave Lee, an analyst for the BBC, notes:

France will be hoping for one of two outcomes. Either countries follow their lead and implement their own, independent laws, limiting France’s exposure. Or the move gives added energy to calls for a multilateral agreement on how digital firms should be taxed globally…

The matter will be on the table at the next G7 meeting, scheduled for August 24-26th.

On va voir.

Dave Davis

Author: Dave Davis

Dave Davis joined CCC in 1994 and currently serves as research analyst. He previously held directorships in both public libraries and corporate libraries and earned joint master’s degrees in Library and Information Sciences and Medieval European History from Catholic University of America. Dave is fascinated by copyright issues, content licensing and data. Also, rock and roll music.

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