Germany supports EU reform of digital business tax

Germany is supporting a radical reform of corporate taxation in the digital economy, the newspaper "Sueddeutsche Zeitung" reports on Monday.

The joint-initiative by the German, French, Spanish and Italian Ministries of Finance seeks to create a new "equalization" levy that targets corporate revenues rather than profits as a basis for taxation.

A memo on the subject circulated ahead of an upcoming EU finance ministers meeting in Tallinn, Estonia was first obtained by the online media outlet "Politico". The measures sketched therein are designed specifically with view to digital companies such as Facebook, AirBnB and Google.

EU officials have long criticized predominantly U.S. firms for paying negligible amounts of tax in Europe despite recording a large share of their revenues on the continent. By registering patents and employing staff in low-tax jurisdictions they hereby often succeed in legally evading the grasp of fiscal authorities in the countries where they market their products.

"We should no longer accept that these firms do business in Europe while paying minimal amounts of tax to our treasuries" the memo co-signed by German Finance Minister Wolfgang Schaeuble (CDU) reads.

The paper goes on to warn that "economic efficiency is at stake, as well as tax fairness and sovereignty."

The European Commission welcomed the proposal on Monday. In order for any concrete legislation to pass, however, the unanimous consent of all 27 EU members is required. Similar initiatives on trans-national fiscal cooperation in the past have met with resistance from the likes of Ireland, Luxemburg and Malta where many U.S. tech companies have their European headquarters.

The proposal remained vague with regards to how high a tax on revenue would be levied. It only states that the "amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax."