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The European Commission has outlined a plan to change the system of taxation for large Internet companies. The argument is that huge digital companies like Google and Amazon have been paying an unfair, low tax rate in Europe. Most of the biggest firms are American, and they say they're being unfairly targeted at a time when transatlantic tensions are already strained. NPR's Eleanor Beardsley reports from Paris.
ELEANOR BEARDSLEY, BYLINE: With 500 million well-connected consumers, the European Union is a lucrative market place for Internet companies. But European leaders say large digital firms like Google, Amazon, Facebook and Apple are not paying their share of taxes. In a recent interview with NPR, French Finance Minister Bruno Le Maire said that has to change.
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BRUNO LE MAIRE: We want to ensure fair taxation for everybody. I'm asking the small and medium-sized French companies to pay their due taxes either in France or in Europe. I just want to ask the same to the Internet giants. They have to pay their taxes like any other private company.
BEARDSLEY: The EU complains that foreign Internet companies do most of their business in large countries like Germany, France and Britain, yet locate their headquarters in small, low-tax countries such as Ireland and Luxembourg. Peter Chase studies at the German Marshall Fund in Brussels. He says the EU is looking to change the basis of corporate taxation.
PETER CHASE: They want to say that if a company does a lot of digital business, if it works like a marketplace to bring people together and then gets a fee for that, if they do all that business in their territory, then that should be enough to say they have a significant digital presence.
BEARDSLEY: And so that's where the EU thinks companies should pay their taxes, says Chase.
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PIERRE MOSCOVICI: (Speaking French).
BEARDSLEY: Last week, Pierre Moscovici, the European commissioner in charge of taxation, said in the last 20 years, the digital revolution has up-ended economies and changes the way companies create value. He told journalists tax law needs to keep up with those changes.
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MOSCOVICI: That those companies pay in the EU something like 9 percent whilst the rest of the economy pays 23 percent. And people don't accept that. That's why we are acting now decisively.
BEARDSLEY: Moscovici says until the EU can make permanent changes to the way Internet companies are taxed, it will create a temporary solution, a 3 percent tax on digital company revenues, which will raise about 5 billion euros a year.
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MOSCOVICI: This interim solution will focus on turnover from activities where user participation plays a central role in value creation, meaning most of the digital services we use in our daily life.
BEARDSLEY: Moscovici said in order to avoid damaging startups, the measure will concentrate on large Internet firms. But he insisted the EU is not targeting American companies.
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MOSCOVICI: This is not an anti-American approach. It is not an anti-American tax.
BEARDSLEY: Moscovici said about 150 companies will be affected by this tax and only half are American. Not all EU members are likely to be on board in changing the basis of corporate taxation, says Chase.
CHASE: Small countries that are really adept at technologies, these are the ones that are going to have a problem with the redistribution of what should be their government revenues to big countries like Germany.
BEARDSLEY: With so many conflicting points of view, Chase says it might take a long time to get approval from all 27 EU member states. But in the meantime, he says, the debate over digital taxation in Europe is straining transatlantic trade relations. Eleanor Beardsley, NPR News, Paris.
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