A new tax on personal data collection?

By Gabriel Voisin


 In July 2012, the French government commissioned Pierre Collin and Nicolas Colin (the Rapporteurs) to identify measures addressing what is seen as tax avoidance by digital companies. On 18 January 2013, the Rapporteurs issued their Report, which can be found (in French) here. The report suggests acting on two different levels.

International Scale

The Report firstly suggests redefining the notion of a “permanent establishment” provided for by the Organisation for Economic Cooperation and Development (OECD), upon which all taxation of companies of the member states are subject to. The report proposes to take into consideration the so-called “free work” of users which, in providing their data, form a strategic source of revenue for digital businesses. The OECD has already been involved in such work on multinational taxation. This stream of revenue could come to an end between 2013 and 2014.

French Scale

In the meantime, the Rapporteurs suggest legislating at a national level, proposing taxation based on the collection and use of personal data in France.

1. Rationale:

The report suggests that few digital companies hardly pay any tax in countries where their users are based. Therefore, according to the Rapporteurs, the added value created should be taken into account when they state their profits in a country. According to the Report, tax authorities should at least take care to limit the transfer of profits between subsidiaries of a group in different countries.

From the Rapporteur’s point of view, the ability to gather users and collect data is an asset, which is locally taxable as it can be linked to a permanent establishment. However, this new tax might be difficult to put into place as not all data is uniform: the value varies greatly according to source, rarity, use, etc. In this respect, the Rapporteurs recognise that no known economist interviewed while preparing the Report has been able to propose a method in order to isolate the share of the value coming from processing of personal data of users, for any given business.

2. Creation of a model:

However, according to the Rapporteurs, tax authorities should tackle this new challenge. For the Rapporteurs, market data on the digital economy already exists (e.g. data coming from intelligence services, financial communications services). Additionally, tax authorities could rely on academic research to create a new comparative model for the valuation of data.

The Rapporteurs suggest this new tax should first be experimented upon the biggest contributors. The proposed tax would be used “only above a certain threshold in the number of users, to be determined”, so as not to penalise start-up businesses. The business will itself quantify, under guidance from the tax administration, the volume of data that it collects and uses. According to the Report, taxation would be made in the form of a single tariff per user, which could vary according to the behaviour of the business (e.g. compliance towards data protection, data security and data portability). The approach is being presented by the Rapporteurs as “an incentive” and should not be viewed as a means of financial gain.

Next steps

A follow-up to the Report is yet to be decided. Two legislative initiatives might offer a window for the proposal to go further:

Draft legislation on a neutral and fair digital tax (first public discussion to be held before the French Parliament on January 31, 2013. More information can be found here); and The Annual Budget Proposal to be discussed before the French Parliament in Autumn 2013.

For more information please contact:


Gabriel Voisin
Data Protection Associate


Ariane Mole
Data Protection Partner


Laurence Clot
Tax Partner