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TAXATION IN THE AGE OF E-BUSINESS Protecting revenue, seizing new opportunities

TAXATION IN THE AGE OF E-BUSINESS Protecting revenue, seizing new opportunities. CHALLENGES OF E-TAXATION. JURISDICTION ISSUES. LOCATION OF ACTIVITIES. IDENTIFICATION ISSUES. ANONYMOUS USERS. ENFORCEMENT ISSUES. LESS INTERMEDIARIES. TAXATION OF IMPORTED GOODS.

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TAXATION IN THE AGE OF E-BUSINESS Protecting revenue, seizing new opportunities

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  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 electronically (digitizable goods) Books, music, software,etc

  5. IMPORT TARIFFS FOR DIGITIZABLE GOODS

  6. Revenue implications are not substantial DIGITIZABLE GOODS: POLICY IMPLICATIONS • 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. Applied in the jurisdiction where economic activity takes place, if permanent establishment is determined (“NEXUS”) SOURCE-BASED TAXATION RESIDENCE-BASED TAXATION • Applied in the jurisdiction of the place of residence of the person/business

  10. Is a web-site a permanent establishment? Permanent establishment in the cyber-world • 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. IDENTIFY POTENTIAL NEW INTERMEDIARIES ISPs credit card companies banking and payment system providers telecommunications companies ADAPTING CONSUMPTION TAXES TO E-COMMERCE

  14. INTERNATIONAL COOPERATIONAgreement 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 ADAPTING COMSUMPTION TAXES TO E-COMMERCE

  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. TECHNOLOGICAL NEUTRALITY PRINCIPLES OF E-TAXATION • 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

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