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The European Union on Wednesday unveiled sweeping new legislative proposals to raise taxes on big technology companies, a move that risks angering USA officials when trans-Atlantic relations are already strained by an escalating trade spat.

Its implementation will be fiercely fought by the USA commerce and treasury departments and the American companies - Facebook, Alphabet (owner of Google), Amazon and Twitter, among them - that dominate the digital commerce industry in Europe and around the world.

"Digital profits in Europe exist but are taxed very little or not at all", said the European commissioner for taxation, Pierre Moscovici, who blamed traditional rules designed for companies with a physical presence in the countries where they offer their services.

The odds of the plan actually passing seem somewhat low.

The proposal needs to be approved by all 28 European member states before it becomes law, but the commission's proposals were immediately welcomed by Europe's five biggest economies, known as the G5, on Wednesday.

The first proposed plan is to get large tech companies with digital profits in Europe to pay tax on those profits if they exceed a threshold of 7m euros (£6.1m) in annual revenues in a Member State and have more than 100,000 users in a Member State in a taxable year.

In the second proposal, an interim tax would be placed on revenues from online advertising, facilitating the sale of goods between platforms and the sale of user-generated data.

It is created to apply to activities in which users play a role in value creation - whether via online advertising, such as in search engines or social media, via online trading or in the sale of data about users.

US tech companies themselves have said they are paying tax in line with national and worldwide laws and, in some cases, that the tax should be paid in the United States on profits repatriated there.

Last year, the European Commission fined Google almost $3 billion for abusing its dominant market position, while companies like Apple, Amazon and Qualcomm have also been investigated or penalized.

The US Treasury secretary, Steven Mnuchin, told the New York Times that gross taxes on internet companies were "not fair", on the sidelines of a debate among G20 finance ministers on taxation in Buenos Aires this week. This approach would mean that countries can still tax a company, even if it has no physical presence there. "That's why we're bringing forward a new legal standard as well an interim tax for digital activities", Moscovici added.

The tax would be collected in countries where the users are located.

Moscovici said he had stressed this point to ministers at this week's meeting in the Argentine capital, adding that the commission saw the plans as compatible with European Union obligations under the World Trade Organization.

"We agree with the fundamental thesis of the European Commission: today's tax systems do not reflect that today's economy is digital".

THE EUROPEAN COMMISSION (EC) has unveiled its long-awaited plan to better tax technology companies.


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