Europe's fierce enforcer of competition rules is threatening tech giants with tough new rules on tax if politicians fail to come to an agreement on changes to the current system.
France has led efforts calling for tax to be applied to sales rather than profit, gaining support from Germany, Italy and Spain. And more broadly, the OECD has led global efforts to clampdown on avoidance of corporation tax.
Now, Margrethe Vestager who levied the European Commission's record €2.4bn fine against Google over the summer for anti-competitive behaviour, has warned that it will make its own efforts to reform the system "if there is no international answer" by early next year.
"As we’ve looked at whether companies pay their fair share of tax, it's become clear that our tax systems aren’t well designed for modern ways of doing business," she said in a speech at France's economy ministry on Tuesday morning.
"Tax systems that are based on a company’s physical assets can't easily deal with digital companies. And in fact, domestic digital businesses pay less than half the effective tax rate of their offline equivalents.
"It will take more than competition rules to fix that issue. It will take a reform of our tax systems, not just nationally, but internationally."
She continued: "Last month, the Commission launched a public consultation on how to tax the digital economy. The results of that consultation will help us work with our partners in the OECD, to find solutions that will work all over the world. And if there’s no international answer to this issue by spring next year, we’ll produce our own proposal for new EU rules to make sure digital companies are taxed fairly."
Apple has been forced to repay €13bn in back taxes to Ireland after an investigation by Vestager, while similar rulings about so-called sweetheart tax deals have been made previously involving Starbucks and Fiat.