Digital firms pay less than half tax of traditional rivals: EU Commission

Yves Herman | Reuters

European Union flags fly at the entrance of the European Commission headquarters in Brussels, Belgium September 29, 2015.

Digital companies in the European Union pay in tax less than half the amount paid by traditional firms, the European Commission said in a draft report which backs plans to increase the tax bill of firms like Amazon or Facebook.

In the report to be adopted on Thursday, the Commission says the best solution to address this distortion would be a global deal, but in the absence of sufficient progress it said the EU should move ahead alone.

Short-term solutions include a tax on turnover, as proposed by France and backed by 10 EU countries, the report seen by Reuters said.

Alternative short-term options would be a withholding tax on payments to digital businesses and a levy on revenues from advertisement or other services provided by digital firms.

In the longer-term, the EU should review the notion of “permanent establishment” so that firms could be taxed also in countries where they do not have a physical presence, the Commission said.