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

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BRUSSELS (Reuters) – 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 [AMZN.O], Google [GOOGL.O] and Facebook [FB.O] 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.