'Privacy tax' would hit firms that collect consumers' data

By Bob Sullivan, Columnist, NBC News

A groundbreaking new ?privacy tax? could stem companies? abuse of consumer privacy, argues a report commissioned by the French government.

The proposal, detailed in a report issued by the French Ministry of Finance on Friday, has been compared to a carbon tax designed to dissuade polluters, as envisioned at the Kyoto conference in 1997 that set global emissions caps.

The French study recommends that companies which misuse or fail to protect consumers' data would have to pay a punitive new tax, with the rate rising along with the severity of the misstep. It also provides incentives to firms that exceed current regulations to protect consumers' information.?

---

The idea has met with both curiosity and pessimism.

?It's a very revolutionary and interesting proposal, but it would be hugely difficult in France, let alone around the world, to implement," said Winston Maxwell, a privacy lawyer based in France. Maxwell wrote about the proposal for at the Chronicle of Data Protection blog, published by his law firm, Hogan Lovells.

Sin taxes have long been used to discourage behaviors that governments deem legal but undesirable -- tobacco taxes, for example. The report itself compares this new privacy tax to the concept of a carbon tax, which grew out of the 1997 Kyoto Protocol on climate change. Carbon taxes and credits are included in the agreement as a means creating market pressures to incentivize companies to reduce greenhouse emissions.

The report argues that Google and other companies acquire consumers' personal information essentially for free, and use it to make a profit. This creation of value creates the authority to tax, the report argues.

"The report?s authors analogize the tracking of personal behavior on the Internet to the creation of value using unpaid labor provided by Internet users in France," Maxwell said.?

The idea of the privacy tax arrives as French authorities have publicly bemoaned their inability to effectively tax technology companies like Google.? But the report says revenue collection is secondary to protecting consumers.

Larry Ponemon, a privacy expert who runs The Ponemon Institute, called the French approach novel and compared personal information to a natural resource.

"Right now, companies are benefitting from their ability to exploit people's privacy, the way some companies exploit the environment and make money," he said. "Right now they can get and use that information, essentially for free."

There are myriad problems with creation of a privacy tax, however.? It's hard to imagine a government agency could adequately rule which companies were effectively protecting privacy and which were exploiting it.? Doing so might itself involve a privacy invasion, Maxwell noted.

"The tax administration may have to use invasive technology to monitor what firms are doing on the Internet and determine if a tax is due. Ironically, the technology itself could pose a threat to privacy," he said.

Conceding the many issues with implementation, the report recommends that initially, the government would tax firms that track Internet users in France.

Christopher Wolf, also a lawyer at Hogan Lovells, said he knows of no similar proposal in the U.S., but Ponemon said he's heard privacy advocates discuss the idea informally.

Privacy regulations in Europe are far more consumer friendly than in the U.S. For example, in Europe, personal information is considered property that is owned by the consumer and lent to companies for temporary use; firms must destroy such information in a timely manner.? In the U.S., firms own the data they collect.

While generally supportive of the French proposal, Ponemon cautioned that it would be both ineffective and damaging to France if the nation tried to unilaterally impose such a tax. ?

"If you were to stop Google, you would be stopping an economic engine that's had a major effect on economy of a country," he said.??

Even consumers might protest such a privacy tax, and the idea behind it, he said. Why should government benefit from what is deemed an abuse of consumers? personal information? ?

"People will think the individuals should benefit, not the government. They'll want to be paid directly," he said.

* Follow Bob Sullivan on?Facebook.

* Follow Bob Sullivan on?Twitter.

More from Red Tape Chronicles:

?

Source: http://redtape.nbcnews.com/_news/2013/01/22/16646765-proposed-privacy-tax-would-penalize-firms-that-profit-from-consumers-data?lite