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Court Upholds French Social Data Mining Tax Law

Dec. 27, 2019, 9:39 PM

France’s high court mostly approved a controversial new law that allows tax authorities to use social media data to catch tax cheats.

The Constitutional Council said Dec. 27 that the law balanced the right to privacy and freedom of expression with efforts to fight tax fraud, but it stopped its reach in some areas.

The measure, included in the country’s 2020 budget act, would give tax and customs authorities a three-year trial period to use artificial intelligence to sift through taxpayers’ public postings on social media sites. Tax authorities want to use that data to find evidence of tax fraud, evasion, and other illegal activity. But critics have warned the measure lacks adequate data privacy protections.

The court struck down language allowing authorities to use data to look for evidence that taxpayers had received a warning for failure to file a tax return.

Because authorities already have evidence of an infraction by taxpayers, the government’s use of social media in these cases would be unnecessary and would pose disproportionate harm to their constitutional rights, the court said.

The information must also be made public by the user and shouldn’t be password protected, the courts said.

The court would likely re-examine the measure if and when the government decides to make it permanent after three years, it said.

Budget Minister Gérald Darmanin praised the ruling on Twitter despite part of the law being struck down. “One more tool to fight fraud!,” he said.

The court also struck down, on technical grounds, a tax measure to finance the government’s plan to establish a Grand Paris metropolitan area.

It affirmed a provision eliminating the country’s tax on primary residences for 80% of households in 2020 and all households by 2023. Local governments have complained that the government’s plan doesn’t adequately compensate them for loss of revenue.

The 2020 budget law, cleared by Parliament Dec. 19, also cut the top corporate tax rate from 33.3% to 31% for large companies.

It includes a provision requiring heads of large companies to have French tax residency, several measures to fight value-added tax fraud, and a 5 billion euro ($5.6 billion) tax cut for low- and middle-income households.

To contact the reporter on this story: Rick Mitchell in Paris at correspondents@bloomberglaw.com
To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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