Its one of those times I really hate to be right. As many of you know I have been talking about the various grass roots efforts afoot across many of the Member EU countries to start driving a more significant tax regimen on Internet based companies. My predictions for the last few years have more been cautionary tales based on what I saw happening from a regulatory perspective on a much smaller scale, country to country.
Today’s Wall Street Journal has an article discussing France’s movements to begin taxation on Internet related companies who derive revenue from users and companies across the entirety of the EU, but holding those companies responsible to the tax base in each country. This could likely mean that such legislation is likely to become quite fractured and tough for Internet Companies to navigate. The French proposition is asking the European Commission to draw up proposals by the Spring of 2014.
This is likely to have a very interesting (read as cost increases) across just about every aspect of Internet and Cloud Computing resources. From a business perspective this is going to increase costs which will likely be passed on to consumers in small but interesting ways. Internet advertising will need to be differentiated on a country by country basis, and advertisers will end up having different cost structures, Cloud Computing Companies will DEFINITELY need to understand where instances of customer instances were, and whether or not they were making money. Potentially more impactful, customers of Cloud computing may be held to account for taxation accountability that they did not know they had! Things like Data Center Site Selection are likely going to become even more complicated from a tax analysis perspective as countries with higher populations will likely become no-go zones (perhaps) or require the passage of even more restrictive laws around it.
Its not like the seeds of this haven’t been around since 2005, I think most people just preferred to keep a blind eye to the tax that the seed was sprouting into a full fledged tree. Going back to my Cat and Mouse Papers from a few years ago… The Cat has caught the mouse, its now the mouse’s move.
Authors Note: If you don’t have a subscription to the WSJ, All Things Digital did a quick synopsis of the article here.