EU to propose new tax on digital firms up to 5 percent of their gross revenues

The European Commission wants to tax large digital companies` revenues based on where their users are located rather than where their headquarters are, at a rate between 1 and 5 percent, a draft Commission document showed.

The proposal, seen by Reuters, aims at increasing the tax bill of firms like Amazon, Google and Facebook that are accused by large EU states of paying too little in tax by re-routing their EU profits to low-tax countries such as Luxembourg and Ireland.

The proposal says that the tax should be applied to companies with revenues above 750 million euros ($922 million) worldwide and with EU digital revenues of at least 10 million euros a year.

The document is subject to changes before its publication which is expected in the second half of March. The tax would be a temporary measure until a more comprehensive solution to fair digital taxation is approved, the Commission said.

($1 = 0.8129 euros)

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