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EU proposes ‘digital tax’ for tech giants

Large companies with significant digital revenues in the European Union such as Google and Facebook could face a three percent tax on their turnover under a draft proposal by the European Commission seen by Reuters.

According to the report, the proposal is expected to be adopted next week and still subject to changes, updates an earlier draft which envisaged a tax rate of between 1 and 5 percent.

The tax, if backed by EU states and lawmakers, would only apply to large firms with annual worldwide revenues above 750 million euros ($924 million) and annual “taxable” revenues above 50 million euros in the EU.

The threshold for EU revenues has been raised from 10 million euros initially foreseen to exempt smaller companies and emerging start-ups from the tax.

US firms such as Uber, Airbnb and Amazon could also be hit by the new levy, which would apply across the 28 EU countries.

Big tech firms have been accused by large EU states of paying too little tax in the bloc by re-routing some of their profits to low-tax member states like Ireland and Luxembourg.

While an earlier version of the draft seen by Reuters mentioned several companies, the latest proposal contained no such references.

The report noted that the services that will be taxed are digital advertising, which would capture both providers of users’ data like Google, and companies offering ad space on their websites, like popular social media such as Facebook.

The tax would be also be levied on online platforms offering “intermediation services,” a concept under which the Commission includes gig economy firms such as Airbnb and Uber. Digital market places, including Amazon, would also be within the scope of the levy.

Online media, streaming services like Netflix and other providers of digital content which do not rely on users to create value will be excluded from the scope of the levy.

EU tax reforms need the backing of all member states to become law.

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