FRENCH internet executives, bloggers and web users cringed in early January when an independent report for the ministry of culture proposed a tax on online advertising revenues, aimed at American firms such as Google, Microsoft, AOL, Yahoo! and Facebook, to pay for new subsidies for the music, film and publishing industries. “Will they send helicopters to America to take the money?” mocked Pierre Kosciusko-Morizet, boss of PriceMinister.com, an e-commerce site. “The world now takes us for fools,” commented Bluetouff, a blogger, echoing hundreds of comments on French newspapers' websites opposing the tax.

France's recorded-music industry has been particularly hard hit by illegal downloading. Sales of CDs have fallen faster than elsewhere, while legitimate downloads have grown more slowly. Whereas legal downloads have compensated for around 40% of the fall in CD sales in recent years in America and Britain, in France they have made up for only 19% of the drop. To help French content online, says the report, the government should spend €40m-50m ($58m-73m) a year on measures such as subsidies for digital purchases and faster digitisation of books.

To cover the cost the authors of the report recommended a tax aimed at the handful of American firms which dominate France's internet-advertising market, notably Google, even though these bear no responsibility for the music industry's woes. Such a tax, of around 1-2% of revenues, could raise as much as €10m a year, according to the report. Nicolas Sarkozy, France's president, has asked the finance ministry to look into designing one.

Mr Sarkozy also called for an inquiry by French competition authorities into whether Google abuses its dominant position in the internet-ad market. His true aim, some argue, is to bully the search giant. Older media, advertising agencies and domestic web rivals increasingly complain about its grip on the market. The government recently spent €7.5m on a stake in Dailymotion, a popular online video service which competes directly with Google's YouTube, with the aim of creating a French-language internet champion.

But many French internet firms fear a new tax. It may be impossible to set a minimum threshold for taxable revenue that penalises foreign firms but exempts domestic ones, especially as the latter grow. If the limit is set low enough to ensnare Facebook, for instance, which earns comparatively little in France, some French firms could also be hit. A levy on advertising could easily mutate into a tax on subscriptions to websites, says Dan Serfaty, chief executive of Viadeo, a business-networking site based in Paris. Viadeo may move abroad if a tax is introduced, he says.

To experienced cyber-entrepreneurs, the government's proposal for a new tax on internet firms is not surprising. “French governments always try to take money from young industries to sustain the old ones,” says Pierre Chappaz, chief executive of Wikio, a search engine for news and blogs, and a former co-head of Netvibes, a website that lets users personalise online content. A controversial new law which cuts off internet access for illegal downloaders demonstrates the established media's lobbying power.

Although French entrepreneurs have started many successful young internet firms, most tend to be local rather than pan-European. One problem is that France's high taxes on stock options makes hiring difficult. Partly for that reason, points out Mr Chappaz, many start-ups, including Netvibes, already have their headquarters outside France.