World Bulletin / News Desk

The European Union will next week unveil plans for a digital tax on US tech giants like Facebook, Amazon and Google as transatlantic tensions flare over prospects of a trade war.

Brussels proposes "big tech" should be taxed on overall revenue in the bloc and not just on their profits, at a rate somewhere between two percent and five percent, according to a draft obtained by AFP.

EU Economic Affairs Commissioner Pierre Moscovici says the plan that he will announce on Wednesday will "create a consensus and an electroshock" on taxing digital firms.

But the digital plan may fan fears of a trade war as Brussels prepares to retaliate against US President Donald Trump's moves to impose steel and aluminium tariffs.

The tech titans plan will target companies with worldwide annual turnover above 750 million euros ($924 million), such as Google, Facebook, Twitter, Airbnb and Uber.

Spared are smaller European start-ups that struggle to compete with them. Companies like Netflix, which depend on subscriptions, may also avoid the chop, a source close to the issue told AFP.

Critics say tax-avoidance strategies used by the California tech giants deprive EU governments of billions of euros while giving them an unfair advantage over smaller rivals.

Under EU law, firms like Google and Facebook can choose to book their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg.

That can mean other nations in the bloc miss out on tax revenue from the US firms, even though sales in those countries may account for a bigger share of the earnings.