Minister for Finance Paschal Donohoe says Ireland is opposed to French proposals to tax large internet companies on their turnover in each EU state, rather than their profits. 

Speaking at an EU finance ministers meeting in Estonia, Paschal Donohoe said the problem should be dealt with by the OECD, which includes the United States.

Ten countries have signed a statement calling on the European Commission to examine the feasibility of the so-called equalisation tax.

The letter - signed by the finance ministers of Italy, Spain, Greece, Portugal, Bulgaria, Slovenia, Romania, Austria, France and Germany - proposes internet companies should pay a tax on their turnover that would "reflect some of what these companies should be paying in terms of corporation tax".

Six countries opposed the idea, while the rest say there is a problem, but question if equalisation tax is the way to deal with it

According to one diplomat, the strongest level of opposition came from Ireland, Malta and Cyprus. 

Luxembourg was said to have raised a series of practical problems about the proposal, arguing it would introduce a lot of complexity into the tax system.

Others, including the UK argued caution, as the proposal could antagonise other non-EU countries, in particular the United States, and urged continuing work through the G20 and OECD process to reform the global corporation tax regime.

The European Commission will outline its thinking on the taxation of internet companies in a detailed tax paper due next week. 

It will be considered by EU heads of government at a summit in Estonia at the end of the month.

The Internet equalisation tax proposal will be further discussed at an Ecofin meeting in December.

The Commission Vice President Valdis Dombrovskis said the December meeting of finance ministers is expected to make a political decision on how to proceed on taxing digital companies. 

He said this would inform a proposal for legislation due from the Commission in the spring of next year. 

It would also set the tone for the EU's input into the OECD's process aimed at delivering a global standard for the taxation of internet businesses.

Only the European Commission can propose a law covering all EU states, and as this is a taxation matter, it would require the unanimous backing of all 28 member states to become law. 

An alternative is for a group of states to push ahead with their own co-oriented action in the field, but it would not apply to any states that did not want to join such an"enhanced co-operation".

The OECD Secretary General Angel Gurria told the Finance minsters meeting that the OECD will publish its own report on taxing the digital economy in April of next year - having been asked to do so by the G20. 

It will also hold a consultation on taxing internet firms in San Francisco early in the new year (most of the Internet giants are California based).

While the Irish government, and some others in the EU believe the matter is best addressed through OECD action - as it will keep the US involved - other states take the view that the EU should be prepared to act alone, in order to put pressure on the OECD process to keep up momentum.