ETax

1
TAXATION IN THE AGE OF E-BUSINESS Protecting
revenue, seizing new opportunities
2
CHALLENGES OF E-TAXATION
JURISDICTION ISSUES
LOCATION OF ACTIVITIES
IDENTIFICATION ISSUES
ANONYMOUS USERS
ENFORCEMENT ISSUES
LESS INTERMEDIARIES
3
TAXATION OF IMPORTED GOODS
4
For goods which are traded on-line delivered
physically
No new issues taxation at the border
Problem of - identification of taxpayer, -
definition of jurisdiction, - enforcement of
payment
For goods that are traded and delivered electroni
cally (digitizable goods)
Books, music, software,etc
5
IMPORT TARIFFS FOR
DIGITIZABLE GOODS
6
DIGITIZABLE GOODS
POLICY IMPLICATIONS

• Revenue implications are not substantial

• Heavy implementation burden of e-taxes

CONTINUE CURRENT MORATORIUM
7
INCOME TAXATION
8
FUNDAMENTAL PRINCIPLES OF INCOME TAXATION

• PERMANENT ESTABLISHMENT

• RESIDENCE-BASED TAXATION

• SOURCE-BASED TAXATION

9
SOURCE-BASED TAXATION
RESIDENCE-BASED TAXATION

• Applied in the jurisdiction of the place of
  residence of the person/business

• Applied in the jurisdiction where economic
  activity takes place, if permanent establishment
  is determined (NEXUS)

10
Permanent establishment in the cyber-world

• Is a web-site a permanent establishment?

• Is a server operating a web-site a permanent
  establishment?

• Can ISP be considered to constitute a
  permanent establishment of the business
  whose web-sites they host?

11
CONSUMPTION TAXATION
12

• VAT SALES TAX
• Collected by seller and borne by the consumer
• Different rules apply to different buyers
  (consumer vs. business foreign vs. domestic)
• Requires the cooperation of intermediaries

• E-COMMERCE CHALLENGE
• Incentive to relocate outside countries
  imposing VAT
• Elimination of intermediaries

13
ADAPTING CONSUMPTION TAXES TO E-COMMERCE

• IDENTIFY POTENTIAL NEW INTERMEDIARIES
• ISPs
• credit card companies
• banking and payment system providers
• telecommunications companies

14
ADAPTING COMSUMPTION TAXES TO E-COMMERCE

• INTERNATIONAL COOPERATION Agreement on whether
  taxation should take place in the country where
  consumer is based, or in the country where
  producer is based or, where consumption occurs

15
SEIZING THE E-COMMERCE OPPORTUNITIES
16
ATTRACT PRODUCTIVE INVESTMENT
MORE MOBILE PLAYERS
WIDER TAX BASE
NEW SERVICES
MAINTAIN REVENUE LEVELS
MORE EFFICIENT ADMINISTRATION
17
PRINCIPLES OF E-TAXATION

• TECHNOLOGICAL NEUTRALITY

• EFFICIENCY

• CERTAINTY AND SIMPLICITY

• EFFECTIVENESS AND FAIRNESS

• FLEXIBILITY

18
WRAPPING-UP..
INCOME TAXES
COMSUMPTION TAXES
IMPORT TAXES
19
THE WAY AHEAD

• International cooperation E-businesses escape
  notions of residence and location

• Cooperation with business use solutions that do
  not hinder technological advance

20

• PREPARE WHILE IMPACT REMAINS TOLERABLE

• KEEP E-TAX LIGHT

• PARTICIPATE IN INTERNATIONAL DEBATE

• SEIZE THE OPPORTUNITIES