Europe to crack down on tech giants' tax practices

The European Commission is launching a review of the tax practices of major tech firms, some of which are estimated to be paying just half of traditional rivals.

Apple, Google and Amazon have all been reprimanded in the past by European bodies for not paying a fair share of taxes, something the Commission is aiming to prevent in the future.

As part of its larger aim of providing more regulation for the digital economy, the EU set out a new agenda for taxing companies in a "fair and growth-friendly way".

Digital businesses with international operations are paying just over 10% tax on average in the EU, while traditional companies fork up 23.2%.

One of the key issues related to such companies is that corporation tax is paid through profits made in the country, rather than turnover figures.

“The underlying principle for corporation tax is that profits should be taxed where the value is created. However, in a digitalised world, it is not always very clear what that value is, how to measure it, or where it is created,” a statement from the Commission said.

Commissioner for economic and financial affairs Pierre Moscovici said tech firms should have to pay taxes on profits made even where they do not have offices.

"Digital firms make vast profits from their millions of users, even if they do not have a physical presence in the EU,” Moscovici said.

“We now want to create a level playing field so that all companies active in the EU can compete fairly, irrespective of whether they are operating via the cloud or from brick and mortar premises."