Positions of electronic Positions of electronic commerce taxationcommerce taxation

1.1. No activities No activities

2.2. No taxesNo taxes

3.3. New taxesNew taxes

4.4. Changes in rules but not principlesChanges in rules but not principles

5.5. Changes in electronic commerceChanges in electronic commerce modelsmodels

USA legal activities in the taxation of USA legal activities in the taxation of e-commercee-commerce

Internet Tax Freedom ActInternet Tax Freedom Act

Internet Tax Elimination ActInternet Tax Elimination Act

Critical position:Critical position:1.1. Regulation of Internet commerce by Regulation of Internet commerce by

imposing state and local taxes will threaten imposing state and local taxes will threaten the growth of e-commerce. the growth of e-commerce.

2.2. The existing tax system is too complex and The existing tax system is too complex and burdensome. burdensome.

3.3. The problem of dealing with the issue of The problem of dealing with the issue of “nexus” or “physical presence” in “virtual” “nexus” or “physical presence” in “virtual” Internet commerce. Internet commerce.

New taxesNew taxes

1.1. FinancialFinancial transactiontransaction taxtax;;

2.2. GET – IT (GET – IT (globalglobal electronicelectronic commercecommerce taxtax basedbased onon informationinformation technologytechnology));;

Electronic Commerce & Traditional Electronic Commerce & Traditional International CommerceInternational Commerce

Principles of International Commerce Taxation:Principles of International Commerce Taxation:

NeutralityNeutrality

Taxation should seek to be neutral and equitable between forms of Taxation should seek to be neutral and equitable between forms of electronic commerce and between conventional and electronic commerce and between conventional and

electronic forms of commerce. Business decisions should be electronic forms of commerce. Business decisions should be motivated by economic rather than tax considerations. motivated by economic rather than tax considerations.

Taxpayers in similar situations carrying out similar Taxpayers in similar situations carrying out similar transactions should be subject to similar levels of taxation.transactions should be subject to similar levels of taxation.

Electronic Commerce & Traditional Electronic Commerce & Traditional International CommerceInternational Commerce

Principles of International Commerce Taxation:Principles of International Commerce Taxation:

EfficiencyEfficiency

Compliance costs for taxpayers and Compliance costs for taxpayers and administrative costs for the tax authorities administrative costs for the tax authorities should be minimised as far as possible.should be minimised as far as possible.

Electronic Commerce & Traditional Electronic Commerce & Traditional International CommerceInternational Commerce

Principles of International Commerce Taxation:Principles of International Commerce Taxation:

Certainty and simplicityCertainty and simplicity

The tax rules should be clear and simple to The tax rules should be clear and simple to understand so that taxpayers can anticipate understand so that taxpayers can anticipate

the tax consequences in advance of a the tax consequences in advance of a transaction, including knowing when, where transaction, including knowing when, where

and how the tax is to be accounted.and how the tax is to be accounted.

Electronic Commerce & Traditional Electronic Commerce & Traditional International CommerceInternational Commerce

Principles of International Commerce Taxation:Principles of International Commerce Taxation:

Effectiveness and fairnessEffectiveness and fairness

Taxation should produce the right amount of tax Taxation should produce the right amount of tax at the right time. The potentional for tax at the right time. The potentional for tax

evasion and avoidance should be evasion and avoidance should be minimised while keeping counter-acting minimised while keeping counter-acting

measures proportionate to the risks measures proportionate to the risks involved.involved.

Electronic Commerce & Traditional Electronic Commerce & Traditional International CommerceInternational Commerce

Principles of International Commerce Taxation:Principles of International Commerce Taxation:

FlexibilityFlexibility

The systems for the taxation should be flexible and dynamic to ensure that they keep pace

with technological and commercial developments

Electronic Commerce DirectiveElectronic Commerce Directive

In order to allow the unhampered development of In order to allow the unhampered development of electronic commerce, the legal framework must be electronic commerce, the legal framework must be clear and simple, predictable and consistent with clear and simple, predictable and consistent with the rules applicable at international level so that it the rules applicable at international level so that it does not adversely affect the competitiveness of does not adversely affect the competitiveness of European industry or impede innovation in that European industry or impede innovation in that sector.sector.

Seven Criteria for an efficient and Seven Criteria for an efficient and equitable taxation of the e-commerceequitable taxation of the e-commerce

1. The system should be equitable;2. The system should be simple;3. The rules should provide certainty;4. Any system adopted should be effective;5. Economic distortions should be avoided;6. The system should be sufficiently flexible

and dynamic;7. fair sharing of the Internet tax base between

countries.

Source: OECD Observer No. 208, 1997

Changes in electronic Changes in electronic commercecommerce modelsmodels

One of the legitimate functions of a tax system is to channel commerce away from forms that are hard to tax into essentially equivalent forms that are easy to tax.

McIntyre M. J.McIntyre M. J.