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Israel Considers ''Google Tax'' on Search Engines for Copyrighted Web Content

Friday, January 10, 2014
By Jenny David

Jan. 8 --Israel's parliament is advancing a legislative proposal to impose a seven percent royalty on Google and other search engine companies that link to locally produced internet content.

Eventually, the law will also apply to social media like YouTube that derive advertising revenue from their Israeli links, Erel Margalit, the bill's parliamentary sponsor, told Bloomberg BNA Jan. 1.

Multinational search engines like Google profit greatly from, and would not be able to exist without, the sites to which they refer web surfers, the bill states. The content sites themselves do not always see an increase in paid traffic because the search engine's abbreviated results often suffice for surfers looking for a specific answer, it says.

“Internet content providers should be paid for their original works just like songwriters or playwrights,” Margalit said, also noting the need to break Google's “near monopoly on online advertising” in Israel.

“Israeli democracy is in danger,” Margalit said in a Dec. 17 statement, following a turbulent first debate of the bill. “Google has become a search engine technology tycoon in the State of Israel. The Israeli economy needs new thinking about the connection between high technology and the country's economy and growth.”

The bill -- which specifically cites Google and has been dubbed “The Google Law” -- would require all foreign and locally operating search engines to forward royalties to the finance ministry by June 1 each year. The revenues would then be divided among eligible Israeli web-content creators by a new, inter-ministerial committee modeled on the mechanism provided in Israel's Law for Encouragement of Israeli Culture and Creativity.

To be eligible for financial support, an electronic content site would have to be at least one-year old, updated at least weekly and produce at least 30 percent of its own content, not including user-generated posts.

“Google's concentration [of economic power] comes at the expense of Israeli creativity,” said Margalit, who was a high-tech entrepreneur before his 2013 election to the parliament. “While the media are weakening, search engines are getting stronger and becoming the indisputable sheriff of content management and navigation on the web,” he said, adding that “the revenues from content and production must be divided among their owners and not accumulate in the hands of one large body.”

Google has not agreed to revenue participation anywhere in the world. It has, however, signed cooperative agreements with a number of governments -- including Israel's on Dec. 31 -- to help “foster technological innovation, improve online government services and promote start-ups.” It also sponsors scholarship programs for students who are interested in developing innovative technologies for the public sector.

More exceptionally, and under intense pressure from the French government, Google recently established an 60 million euro ($81.3 million) fund to help the French press transition to digital operations (34 PTD, 2/20/13).

“Innovation and commercial cooperation is a better way forward than new legislation in order to ensure that the content industry thrives online,” a Google spokesman said. “Google works closely with publishers to develop new technology to increase their audiences, revenue, and engagement on their sites, and we will continue doing so.”

Nevertheless, Margalit said, Israeli copyright law, which dates back to the British Mandate, “must be updated for changing times.”

“Revenues from content and creativity should be shared with their owners rather than being concentrated in one big body,” he said, warning that “if we do not pass such a law now, the free press in Israel will be greatly harmed, and we will be left only with newspapers controlled by wealthy capitalists and doing their will.”

Google Israel's revenues, while not public, are currently estimated at between ILS500 million ($143 million) and ILS1 billion ($286 million) annually.

Although the bill has already been submitted to the parliament, and made public, it will only undergo a formal Knesset reading in February, Margalit said, “by which point we hope to have a more final model that is fair to the companies and compatible with similar legislation moving forward in other countries.”

To contact the reporter on this story: Jenny David in Jerusalem correspondents@bna.com

To contact the editor responsible for this story: Derek Tong at dtong@bna.com

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