"It is urgent to close the gap in international tax rules in order to ensure the fair taxation of profits from businesses in the digitalised economy," said an EU document seen by AFP, prepared for a meeting of finance ministers in Estonia on September 15.
The paper was drawn up by the government of Estonia, which currently holds the EU's six-month rotating presidency and sees itself as a digital leader in Europe.
The document deplores the current situation in Europe in which taxing rights are held by EU nations with the "physical presence" of multinationals.
Instead, in the proposal, large digital businesses would be liable to pay corporate tax in the countries where they make profits, not only where they are present.
Many digital platforms operating in the EU are based in Ireland which offers a low corporate tax regime, allowing internet giants to escape a higher tax rate in other member countries.
Several national authorities in the EU have opened up tax fights with Google and other Internet giants.
A French court ruled in July that US Internet giant Google was not liable for EUR 1.12 billion ($1.27 billion) in taxes claimed by the state. France appealed the decision.