European Tech Firms Warn Against EU Digital Services TaxTechnology Firm chiefs have warned that an Electronic services tax proposed by the European Union would hinder innovation and hurt economic Development.

In a letter to finance ministers of the 28-nation European Union, leaders of 16 tech companies such as Spotify, and Zalando state the proposed tax will undermine the EU’s goal of an electronic single economy and”damage the very businesses which are the catalysts for economic growth and employment in the European economy.”

Johannes Bahrke, spokesman at the EU’s executive Commission, defended the proposal Tuesday, saying it intends to make a”level playing field” for businesses whether they’re based in or outside the EU.

“Our proposal remains fully grounded on the most elementary principle of corporate taxation which is that gains should be taxed where the value is made,” he said.

The European Commission unveiled its strategy in March, insisting that EU member nations should be able to tax companies which make profits on their land even if they aren’t physically present.

The proposal was viewed as a method of earning tech giants like Google and Facebook pay more taxes.

Brussels argues that corporate taxation rules have not kept up with the development of this borderless digital marketplace that makes it possible for some companies to make huge gains in Europe nevertheless pay very little tax.

In the EU, overseas firms like Amazon, Google and Facebook cover what tax they owe from the country where they have their regional foundation – usually a low tax haven including Ireland.

Britain, that is scheduled to depart the EU on March 29, declared its tech taxation on Monday.

Treasury leader Philip Hammond said the proposed tax might aim UK-generated earnings of particular digital platform business models. Hammond, like the EU, said he would prefer an global solution.

In their letter, tech CEOs warned that the EU proposal”will have a disproportionate impact on European companies, resulting in unfair treatment.”

They also said the tax will be hard to execute, could lead to double taxation for a number of companies and may cause retaliatory measures from different nations.

Addressing EU finance ministers ahead of a November 6 meeting, the letter urged them”not to adopt a step which would cause material harm to economic growth as well as innovation, investment and employment throughout Europe.”