France will levy a 1 percent what it dubbed as ‘Google tax’ on online advertisements, effective January 1.

French parliament decided on Tuesday that the tax on France-based companies will be 1 percent of the net amount spent on online advertising.

The move was dubbed ‘Google tax’ as it was conceived as a direct tax on the search engine and its competitors.

President Nicolas Sarkozy had called for additional tax on Google and its competitors at the beginning of the year.

A deal for the 2011 national budget is being worked out by the parliamentary commission for some time and has already been approved by the two houses of parliament.

A compromise was reached after making considerable changes to the bill, pending a formal approval. The draft legislation is unlikely to be overturned.