EU Economics Affairs Commissioner Pierre Moscovici unveils digital tax targeting US tech giants

European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici addresses a press conference at the European Union in Brussels on March 21, 2018. (Photo by AFP)

The EU unveiled Wednesday proposals for a digital tax that targets US tech giants, heaping more problems on Facebook after revelations over misused data of 50 million users shocked the world.

The special tax is the latest measure by the 28-nation European Union to rein in Silicon Valley giants and could further embitter the bad-tempered trade row pitting the EU against US President Donald Trump.

EU Economics Affairs Commissioner Pierre Moscovici presented his proposals in Brussels aimed at recovering billions of euros from mainly US multinationals that shift earnings around Europe to pay lower tax rates.

"This current legal vacuum is creating a serious shortfall in the public revenue of our member states," France's Moscovici told a press conference in Brussels.

"We estimate this could generate at least five billion euros a year if the tax is imposed at 3 percent."

Moscovici insisted it was "not an anti-GAFA tax nor an anti-US tax", referring to the popular acronym for Google, Apple, Facebook and Amazon.

This file photo taken on September 28, 2017 shows a smartphone being operated in front of GAFA logos (acronym for Google, Apple, Facebook and Amazon web giants) as background in Hédé-Bazouges, western France. (Photo by AFP)

The transatlantic blow has been championed by French President Emmanuel Macron and will be discussed over dinner at an EU leaders summit on Thursday.

The unprecedented tech tax follows major anti-trust decisions by the EU that have cost Apple and Google billions and also caught out Amazon.

The EU tax would affect revenue from digital advertising, paid subscriptions and the selling of personal data.

The tax lands as EU agencies are also set to tighten rules on data privacy, targeting tech firms. That file has come to the forefront following revelations that a firm working for Trump's US presidential campaign harvested data on 50 million users of Facebook.

The EU tax plan will target mainly US companies with worldwide annual turnover above 750 million euros ($924 million), such as Facebook, Google, Twitter, Airbnb and Uber.

Spared are smaller European start-ups that struggle to compete with them.

Brussels is seeking to choke tax-avoidance strategies used by the tech giants that, although legal, deprive EU governments of billions of euros in revenue.

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.

As an example, Amazon operates across the bloc, but is headquartered in tiny Luxembourg, which has offered sweetheart tax deals that have allowed the firm to pay low effective taxes.

The European Commission estimates that digital businesses pay an average effective tax rate of just 9.5 percent, compared with the 23.3 percent that traditional businesses pay.