Taxing Questions

I didn’t think I would write any other posts on this blog.  The Presidential and Legislative campaigns of 2017, which saw the political movement I have supported (in various guises and in various countries) for 20 years almost wiped out.  The Parti Socialiste (PS) agonizes still, and has begun the process of choosing its new leadership, more of which elsewhere on this blog (as I am increasingly infuriated at that).  However, what has moved me to write after such a long gap is my frustration at French attitudes to taxation.

I pride myself on my degree of assimilation into the French way of life, language, culture and politics.  However I scratch my head with bewilderment every time the subject turns to taxation, for the French are afflicted with a terrible disease – that of the New Tax.

In fairness to my adopted country, the idea that for every problem the simplest solution is a ring-fenced tax is not unique to France.  However, what is odd in France is that the tax is usually designed to produce an output effect (what the money raised is used for) rather than thinking about the input effects (what behaviour will be affected by imposing the tax on a specific type of transaction).  When Denmark instituted taxes in the 1930s on fatty and sugary foods, it was more about making certain (largely imported) products more expensive to encourage consumers to purchase “healthier” (largely locally produced) foods, than about creating a fund to improve health (although there is nothing to stop general taxation from promoting good health).  The most efficient taxes promote a desired behaviour in both their influence on those who are taxed, such as a carbon tax encouraging businesses to lower their carbon footprint by investing in more energy efficiency, whilst being simple in its application and collection.

In France, a problem is identified and money is seen as the solution.  A tax is then crafted with little thought about the impact on the behaviour of those who will pay the tax and often no thought on the efficiency of collecting the tax itself.  My particular frustration has been piqued by the former Minister for victims of terrorism, Juliette Meadel.  She has proposed a tax to promote freedom of speech that is full of woolly thinking.  The problem she has identified is that smaller press outlets find it expensive to buy in private security when their safety is threatened by violent groups (Islamist are referred to in the article but Meadel didn’t specifically mention them – the extreme right are just as nasty and vocal after all).  They therefore need financial assistance with these increased costs otherwise they risk shutting down under the burden.

Meadel assumes therefore that the police (who one would think would help to protect media outlets facing a real threat) are refusing to help unjustifiably.  A media outlet is quoted in the article above as saying that the police will protect journalists but not their offices.  The police should be reminded that they exist to protect private property as well as people.

She also assumes that the extra costs should, failing the police, still be borne by the State via private security companies.  The idea of the State paying private security to protect a particular type of business is rather alarming.  The measure is also a pure palliative, rather than a curative, dealing with one of the consequences of the problem rather than spend the money tackling the root of the problem – violent groups who target the media.  It is also unclear how a press outlet would qualify for the money (the conditions of attribution would need to be objective or open to all to avoid State Aid issues under EU law).

I have great sympathy for organs of the press who find themselves spending money on costly security, but they already receive lots of public money from various State programs.  Perhaps those should be improved or redirected away from traditional newspapers towards more online only operations?  France’s media regulation and the public subsidies that come with it were largely designed with national and local newspapers and a couple of terrestrial television channels in mind.  President Macron has announced a desire to reform the sector, and Meadel could have pipped him to the post by proposing sweeping changes to the sector that would have aided the independent media outlets that she is worried about.

Leaving aside the irony that Meadel announced her plan through a large traditional media organisation (and oddly hasn’t blogged about the measure herself), to fund the measure the GAFA (Google, Apple, Facebook, Amazon – something of a bête noire in the press at the moment) are called upon, Meadel suggests that the “profits from their advertising” be taxed.  Quite how those profits from that activity, which may or may not generate revenue paid for or booked anywhere near France is not explained.  There is a real issue with the way that online businesses are able to structure themselves so that they are taxed in some countries and not others, but that wouldn’t be solved by assuming that the “profits” for the placing of an advert in French is taxable in France.  It probably isn’t today.  There are some interesting ideas about taxing multi-nationals according to the share of global revenue they have in each country, but separating out specific transactions to be taxed specifically is shortsighted and would provoke a huge amount of tax avoidance.  Ms Meadel’s tax would not raise any revenue as a result.  Its collection would also be expensive and time consuming.

My frustration is all the greater for the fact that I campaigned for Ms Meadel in the Legislative elections (she was the candidate for our constituency) and I know her to be thoughtful and intelligent, with a keen political sense.  She took a government job that smacked of a PR exercise by President Hollande, and made it a real, effective tool in helping victims of terrorism and their families.  But here she has fallen into the trap that plagued the first two years of François Hollande’s administration, until the tax “revolt” and a resulting media and public opinion backlash.  Seeing each problem as solvable by a new tax is lazy governance.  In order to act, the State needs financial resources, but the State doesn’t just need financial resources.  It also needs a sense of what it is trying to achieve and to think through the means to achieve those goals.

Meadel’s plan, to issue grants to media companies to pay for private security, funded by taxing multinational media companies (for that is in essence what Facebook etc. are) is short-term-ism in the worst sense.  If Socialism is going to come back from the political wilderness where it currently resides, it isn’t with this kind of fragmentary and woolly public policy making.

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