×

'Europe cannot accept' tax loopholes for American internet companies, says EU commissioner

  • American internet companies often don't pay their "fair share" of European taxes, according to Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Customs.
  • A new system would establish a standard tax base.
  • The EU will likely draft legislation for 2018.
European Commissioner for Economic and Financial Affairs Pierre Moscovici speaks at the EU Commission headquarters in Brussels May 5, 2015.
Yves Herman | Reuters
European Commissioner for Economic and Financial Affairs Pierre Moscovici speaks at the EU Commission headquarters in Brussels May 5, 2015.

American internet giants "should pay their fair share of tax" -- and likely will under a new EU system, according to Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Customs.

"We must tax those companies as we do the so-called classical economy," Moscovici told CNBC's "Squawk on the Street" Monday.

The Commission will rework taxes for internet companies like Google, Facebook and Airbnb, in light of loopholes that allow the companies to pay significantly lower taxes by filing in countries with lighter tax requirements.

"There are situations that people in Europe cannot accept," Moscovici said.

Internet companies might not have a physical presence in Europe but still make huge profits in from the continent, warranting heftier taxes, he said.

The change, he said, is necessary to keep up with a modern economy.

"Our tax system was conceived, I don't know, for the beginning of the 20th century," Moscovici said. "We are in the 21st century with an economy that is much more dematerialized, internationalized, and we must have modern tools to address that."

The new tax system would establish a standard tax base -- revenue, profit, or digital presence, for example -- and likely take effect with 2018 legislation, Moscovici said.

But some are skeptical of drastic change.

Michael Pachter of Wedbush Securities said France's proposed system of revenue-based tax is "unfair."

"I'd say a very low probability this happens," Pachter told CNBC's "Squawk Alley" Monday.

Robert McDowell, former FCC comissioner, said higher taxes on internet giants could raise costs for budding companies and consumers, alike.

"What is now free on the internet might end up costing something," he said on "Squawk Alley."