EU tax plan for tech giants riles US

Transatlantic trade tensions rose on Friday with the news that the European Union (EU) plans to impose a digital tax on

Facebook, Amazon, Google and other big tech companies.

The European Commission, the EU's executive arm, will propose next week that the firms should be taxed on overall revenue in the bloc and not just on their profits, at a rate somewhere between two percent and five percent.

The proposals are aimed at recovering billions from multinationals that divert European earnings to low-tax countries, the latest front in an offensive by Brussels against Silicon Valley giants.

EU Economic Affairs Commissioner Pierre Moscovici says the plan that he will formally announce on Wednesday will "create a consensus and an electroshock" on taxing digital firms.

US Treasury Secretary Steven Mnuchin warned against jeopardizing the major contribution tech firms make to US jobs and economic growth.

"The US firmly opposes proposals by any country to single out digital companies," Mnuchin said on Friday.

The EU plan comes as Brussels and Washington are at odds over US President Donald Trump's intention to impose steel and aluminum tariffs.

Brussels is seeking an exemption from the tariffs but is preparing to retaliate if Trump goes ahead.

The tech giants plan will target companies with worldwide annual turnover above 750 million euros (924 million US dollars), such as Google, Facebook, Twitter, Airbnb and Uber.

Smaller European start-ups that struggle to compete with them will be spared. Companies like Netflix, which depend on subscriptions, may also avoid the chop, according to a source close to the issue.

Critics say tax-avoidance strategies used by the California tech giants deprive EU governments of billions of euros while giving them an unfair advantage over smaller rivals.

Under EU law, firms like Google and Facebook can choose to book their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg.

That can mean other nations in the bloc miss out on tax revenue from the US firms, even though sales in those countries may account for a bigger share of the earnings.

(AFP)