Monsieur Sarkozy, Are You Sure that Taxing the Internet is the Right Way to Preserve a Financial Incentive for Artists and Content Creators?

Most public policy experts agree that Internet access drives a country’s economic growth and productivity – so why would French President Nicolas Sarkozy want to impose a tax on the Internet?

Well, Sarkozy is proposing to ban commercials from public television to halt the decline in the number of viewers – and the lost advertising revenue is to be made up for with a tax on “new means of communication.”

According to Taylor Reynolds, an economist at the Organization for Economic Cooperation and Development based in Paris, “[t]his could be seen as drawing on new technology to fund old technology.”

Indeed. 

The President wants to interfere with the dynamics of the market by weighing down the growth of the Internet with extra charges in order to subsidize older technologies that the French don’t really care for anymore.  And this isn’t even a Socialist President!

Sure, France, like other countries around the world, is struggling to find ways to keep cultural industries, like video and music, afloat at a time when their traditional audiences are waning.  But I suspect that Sarkozy’s proposal might also have to do with his close friendship with Martin Bouygues, whose namesake construction company owns broadcasting company TF1 as well as a mobile phone carrier.   

Bouygues should thank his buddy in the Élysée Palace – within minutes of Sarkozy’s director of communications announcing that the President was determined to implement the measures this year, the shares of TF1 and M6 (another private broadcasting company) jumped in anticipation of less competition for lucrative advertising contracts, gaining 9.9 percent and 4.5 percent respectively.

But for all the self-interested maneuvering that’s going on here, Sarkozy may have actually gotten one thing right.  Given how many people illegally download content on the Internet for free, we will have to find new ways to preserve a financial incentive for artists and content creators.

I just don’t think that taxing the Internet and other new communications tools such as mobile phones is the right way to do this.