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Tech giants face EU digital tax under new proposals

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Tech giants face EU digital tax under new proposals

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REUTERS/Francois Lenoir
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Tech giants stand to pay more tax under proposals outlined by the European Commission on Wednesday.

Under the Commission's plan, companies with significant digital revenues in Europe will pay a 3 percent tax on their turnover on various online services in the EU, bringing in an estimated 5 billion euros.

Officials say the new rules would ensure digital business activity is taxed fairly in the bloc and deny they're specifically going after US giants - Google, Apple, Facebook and Amazon - known as GAFA.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, told a news conference in Brussels:

"This is neither a GAFA tax nor an anti-US tax. Our proposal does not target any company or any country. We estimate that between 120 and 150 companies will actually fall into the scope of our proposals."

The Commission says top digital firms now face an effective tax rate of 9.5 percent in the EU, less than half that of traditional companies.

Under the plans, member states could tax profits generated in their territory, even if the firm does not have a physical presence there.

The tax would apply to large firms with annual worldwide revenue above 750 million euros and annual "taxable" EU revenues above 50 million euros.

Many EU leaders, who will debate the issue of how to claw taxes from the elusive new digital economy at a Brussels summit on Thursday, oppose the executive's proposals. Despite support from big powers Germany and, especially, France, that risks making it very hard to turn the idea into European law.

Campaigners though want much more to be done when it comes to tax reform.

"Our concern is that member states will only focus on the short term solution proposed by the EU Commission," said Johan Langerock, tax policy advisor with Oxfam.

"We call all member states to not fight about this short term solution but to really focus on the long term solution and to reform the international tax rules once and for all."

with Reuters