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Britain set for windfall from web giants under EU's new 'Facebook tax'

Facebook is one of the companies which will be effected by the proposal (Getty)
Facebook is one of the companies which will be effected by the proposal (Getty)

Facebook is among web giants which could soon be forced to pay more tax under new EU plans.

The European Commission today proposed to tax digital firms where they generate profits rather than the locations in which they have offices.

They also want to begin taxing online activity which is not covered by existing law, such as digital advertising and the sale of data generated by users.

The taxes would be collected by member states, such as the UK, but the EU-wide nature of the plan is designed to stop companies fleeing to countries with different rules.

“Our pre-Internet rules do not allow our Member States to tax digital companies operating in Europe when they have little or no physical presence here,” said Pierre Moscovici, the EU Commissioner with responsibility for tax.

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“This represents an ever-bigger black hole for Member States, because the tax base is being eroded. That’s why we’re bringing forward a new legal standard as well an interim tax for digital activities.”

EU Commissioner Pierre Moscovici sets out the plan for a ‘Facebook tax’ in Brussels today (Getty)
EU Commissioner Pierre Moscovici sets out the plan for a ‘Facebook tax’ in Brussels today (Getty)

The proposed taxes will only apply to firms making annual profits of more than £650 million – and more than £40 million of it in the EU.

If it was set at 3%, that would raise an extra £4 billion-a-year for national governments.

The Commission also said it would take the tax burden off traditional firms who currently pay 23% in tax on average, compared to just 9.5% for digital multinations.

The proposals will only take effect if they’re signed-off by all member states.

The unanimous welcome they received from European political groups on both the left and right today suggest there is a consensus.

Green MEP Molly Scott Cato said: “Facebook and others make a considerable amount of money turning our data into a saleable commodity.

“Putting a tax on digital firms’ use of our data would go some way to making sure these firms pay back into society.”

Green MEP Molly Scott Cato supports the plans (Getty)
Green MEP Molly Scott Cato supports the plans (Getty)

But there has been opposition to the proposal from the US Government, who believe it is an attack on their companies.

US treasury secretary Steven Mnuchin said on Friday: “The US firmly opposes proposals by any country to single out digital companies.”

They want the EU to agree a global action plan through the OECD.

But the European Parliament’s largest centre-right group has issued a colourful response to the US.

French MEP Alan Lamassoure said: “Nonsense! A fistful of dollars from the Americans? Let’s leave this one for fans of spaghetti westerns!”

Donald Trump’s treasury secretary, Steve Mnuchin, says US firms are being singled out (Getty)
Donald Trump’s treasury secretary, Steve Mnuchin, says US firms are being singled out (Getty)

Separate plans to tackle tax avoidance by creating a single EU tax regime appear to have been put on hold because of opposition from some member states, including the UK.

A majority of MEPs last week supported plans to set a minimum level of corporation tax and distribute income from firms based on where the revenue was generated.

But British Conservative MEPs set out the UK Government’s objection when they called it “trespass” on area which was meant to be left to national governments.