The European Commission will recommend a tax on global tech companies doing business in the bloc as it attempts to reign-in the influence of giants such as Action Alerts Plus names Facebook Inc. (FB - Get Report) , Apple Inc. (APPL and Google (GOOGL - Get Report) even as it risks escalating the brewing prospects of a trade war between Washington and Brussels.
EU Economics Affairs Commissioner Pierre Moscovici proposed the tax, which would take the form of a 3% levy on companies with global revenues of more than €750 million ($920 million) and taxable EU revenues of €50 million. The suggestions must first be adopted by all 27 European Union member states before than can be set into law. If approved, the new charges could net the EU around €5 billion, the Commission said.
"Our pre-Internet rules do not allow Member States to tax digital companies operating in Europe when they have little or no physical presence," Moscovici said in a Tweet Wednesday. "We present measures to ensure that all companies pay their fair share of tax".
Digital companies currently have an average effective tax rate half that of the traditional economy in the EU— European Commission ���� (@EU_Commission) March 21, 2018
We propose to reform corporate tax rules to ensure a fair share of tax revenues from online activities → https://t.co/MCLAg3ADHP #FairTaxation pic.twitter.com/apnzbMomg6
The EU has long battled with U.S. tech companies over the profits they've earned in the bloc, with the Commission arguing that digital business pay an effective tax rate of 9.5%, largely through locating their European hubs in low-tax countries like Luxembourg, compared to the EU average of 23.3%.
The Commission's move, however, risks inflaming the already-sensitive negotiations on trade and tariffs between Brussels and Washington following President Donald Trump's decision earlier this month to slap import duties on non-American steel and aluminium.
While EU Commission President Jean Claude Juncker has called the tariffs "stupid" and vowed to respond with reciprocal levies on iconic American products such as Levis' jeans, Harley Davidson Motor Cycles and McDonald's hamburgers, Trump has repeatedly vowed to increase pressure on German automakers.