Extract
Going where no taxman has gone before: preliminary conclusions and recommendations drawn from a decade of debate on the international taxation of e-commerce.
I. INTRODUCTION
The advent of e-commerce has forever changed how business is done. Internet operations have launched even the smallest of undertakings into global markets and have made them part of an important industry with enormous potential. Such potential has led to enormous success: in 2008, despite the recession, online retail sales in the United States alone reached $133.6 billion, (1) up from overall sales of $22 billion in 1998. (2) Governments throughout the world and relevant international organizations have recognized that if e-commerce remains beyond the purview of tax authorities, it will present a significant problem for public finances. (3) In the face of aging populations and their strain on national pension systems, lost tax revenue from e-commerce is not just another tax leak that budgets can afford. However, "the application of today's taxing regimes to the contemporary world of telecommunications and electronic commerce is uncertain, inconsistent, and complex." (4) The challenge for governments is to design a tax regime fit for this new cross-jurisdictional electronic environment. The power to tax is one of the most fundamental prerogatives of every sovereign state. Raising tax revenue is a state's powerful instrument of macroeconomic management. Taxation affects legal, economic, social, political and fiscal conditions in any country. Therefore, it is not surprising that e-commerce was quick to appear on governments' tax radars. However, the world's governments have been guarded in their reactions to suggested changes in their tax systems, as well as in the existing system of international taxation. (5) As more and more businesses and individuals rely on the Internet as their primary source of revenue, tax authorities around the world are seeking a uniform solution for taxing e-commerce. The Organization for Economic Co-operation and Development (OECD), the European Union (EU), and the U.S., Australian, and Canadian governments, among others, have issued reports identifying the critical tax issues raised by the advent of e-commerce. (6) Unfortunately, the current positi...See the full content of this document
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