Facebook logo picture illustration made in Zenica, Bosnia and Herzegovina.
The updated proposal is to tax the European advertising revenue of digital companies at 3pc.
Major compromise: The inital proposal was much further reaching, aiming to tax all online revenue made in the European Union by firms with a worldwide annual turnover of at least €750 million ($850 million) and an online turnover of €50 million in Europe.
The tax requires the support of all 28 EU states, including small, low-tax countries like Ireland which have benefited by allowing multinationals to book profits there on digital sales to customers elsewhere in the European Union.
Paris believes a digital tax on the Silicon Valley behemoths would be a vote-getter for mainstream parties ahead of European Parliament elections next May in which anti-EU populists are expected to do well.
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The compromise is a blow to French President Emmanuel Macron's broader plans to reform the euro area.
A number of countries, including the United Kingdom, have proposed national digital taxes with a broader base, and the proposal doesn't stand in the way of those plans.
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"I continue to have strong principled concerns about this policy direction", Paschal Donohoe told his European Union counterparts in a debate on the tax after France and Germany put forward a new proposal focused only on online advertising revenues.
Finance Minister Paschal Donohoe is understood to have reiterated that position at yesterday's meeting in Brussels.
USA lawmaker Kevin Brady, chairman of the tax-writing Ways and Means Committee in the House of Representatives, welcomed the failure of the proposal, calling the tax a "revenue grab" aimed at an industry dominated by American firms.
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France and Germany sought on Monday (3 December) to salvage a proposed EU tax on big digital firms by narrowing the focus to cover only companies' online advertising revenue, a European source said.
"As other countries mentioned, the right and safest way to deal with this is through the OECD to find consensus on global matters".
The latest proposal is meant to come into force in January 2021, but only if the Organisation for Economic Co-Operation and Development (OECD) fails to reach a consensus on a global approach by then.
"Don't expect us to solve the challenge of a generation in a couple weeks or months", French Finance Minister Bruno Le Maire said, adding the Franco-German proposal could still yield a deal.
But Ireland is just one of a number of countries to have raised concerns about the Franco-German plan.
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This echoes the accusation made by app developer Six4Three, from whom the documents were seized. Kramer has been in a legal battle with Facebook since 2015 over developer access to user data.