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Facebook should pay the French government for hosting the holiday photos and status updates of the French people, a new report commissioned by the French government has suggested.

The new 200-page report* on taxing the digital economy - commissioned by four French Cabinet Ministers - proposes that France should tax data collection. The touted idea would see new tax bills from the French government landing on Google, Facebook, Amazon and any other web companies that store data about their French users.

Web companies pay under 1 per cent of what a standard French company would pay in tax, according to figures from Le Monde. Google, Apple and Amazon make between €2.5bn and €3bn apiece in revenue from France. However the average tax paid by each company is €4m a year, instead of the €500m in corporation tax they'd pay if they were French companies.

The report argues that tax hasn't caught up with the digital economy, and taxing data is one way to claim a share for the public purse on the cash made out of French consumers. Changing international law on tax havens and corporation tax rates is a priority, says the report, but the international agreement needed will take years and the report advocates for France to take some action in the meantime.

French wonks: Let's tax data like we tax pollution

Data tax would work like pollution tax, the report's authors propose. The report was written by Nicolas Colin, an advisor to the government and founder and former CEO of a digital marketing company, and Pierre Collin, a tax auditor. The more personal data collected, the more tax would be attracted, the authors propose. But more than sheer quantity will be taken into account.

The tax levied will also depend on what exactly the data is, whether the French government considers the data collection to be more or less ethical, and the potential monetary value of the data. Not the actual monetary value, we note. Sites would have to self-report what data they collect, and would be externally audited periodically.

A formula for how data of different sorts and quantities could be valued was not provided and is likely to be highly contentious.

Operational details will need to be fleshed out, according to the report.

The authors also tackle the knobbly issue of taxing freely given information (eg, Facebook photos) by saying that users of services like Facebook and Google are "workers" for those companies. Even though they aren't paid.

The taxation would be on the premise that the holiday photos of a Facebook user and the search history of a Google user both count as "work" that that the user has done for those companies, because it is a product against which those companies can (and do) sell advertising.

In a rather quaint attempt to explain this to French government ministers, the report compares the business model of web 2.0 outfits to Tupperware parties:

This "free labour" was prefigured by business models from before the digital revolution: quiz shows, Tupperware parties, media financed by advertising, or reality TV. [Section 2.2.1, translated]

Google and Facebook have not yet responded to our request for comment on the report. ®

* Rapport sur la fiscalité du secteur numérique [Report on The Taxation of the Digital Sector] by Pierre Collin and Nicolas Colin was published on 18 January.

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