EU plans rule change to increase taxes on online giants

European Union finance ministers are set to discuss next week rule changes aimed at increasing taxes on digital multinationals such as Google and Amazon, an EU document seen by Reuters said.

Online giants are facing increasing pressure in Europe over the low tax they pay, but states have often found it difficult to raise the bill because existing rules limit the taxation rights to the countries where companies are physically present.

The current legal framework favours digital companies over their physical counterparts and deprives states of valuable tax revenues, the Estonian presidency of the EU said in a document prepared for an informal meeting of finance ministers in Tallinn on Sept 15-16.

The document proposes a reform of international tax rules to change the concept of "permanent establishment" so that digital multinationals could be taxed where they create value, and not only in countries where they have established their tax residence.