TAXATION IN THE AGE OF

U N C T A D United Nations Conference on Trade and Development For goods which are traded on-line delivered physically For goods that are traded and delivered electronically digitizable

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U N C T A D

United Nations Conference on Trade and Development

TAXATION IN THE AGE OF

E-BUSINESS

Protecting revenue, seizing new opportunities

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U N C T A D

CHALLENGES OF E-TAXATION

LOCATION

OF ACTIVITIES

JURISDICTION

ISSUES

ANONYMOUS

USERS

IDENTIFICATION

ISSUES

LESS INTERMEDIARIES

ENFORCEMENT

ISSUES

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U N C T A D

United Nations Conference on

Trade and Development

TAXATION OF IMPORTED

GOODS

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U N C T A D

For goods which are

traded on-line

delivered physically

For goods that are

traded and delivered

electronically

(digitizable goods)

No new issues:

taxation at the

border

Problem of:

- identification of

taxpayer,

- definition of jurisdiction,

- enforcement of

payment

Books, music, software,etc

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U N C T A D

IMPORT TARIFFS FOR DIGITIZABLE GOODS

Tax and Tax and tariff Tax and tariff Tax and tariff tariff revenue revenue revenue revenue (US$ 000) % of imp rev % of tax rev % of total rev.

Caribbean 50,386 1.9 0.4 0.3

Dev Asia 650,493 1.3 0.1 0.1

Developed 4,828,654 20.8 0.3 0.2

E Europe 547,205 10.9 0.4 0.3

Lat Amer 560,131 5.8 0.6 0.4

M East/N Afr 128,352 1.9 0.3 0.2

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U N C T A D

DIGITIZABLE GOODS:

POLICY IMPLICATIONS

• Revenue implications are not substantial

CONTINUE CURRENT

MORATORIUM

• Heavy implementation burden of e-taxes

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U N C T A D

INCOME TAXATION

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U N C T A D

FUNDAMENTAL PRINCIPLES

OF INCOME TAXATION

• PERMANENT ESTABLISHMENT

• SOURCE-BASED TAXATION

• RESIDENCE-BASED TAXATION

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U N C T A D

SOURCE-BASED TAXATION

• Applied in the jurisdiction where economic

activity takes place, if permanent

establishment is determined (“NEXUS”)

RESIDENCE-BASED TAXATION

• Applied in the jurisdiction of the place of

residence of the person/business

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U N C T A D

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?

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U N C T A D

CONSUMPTION

TAXATION

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U N C T A D

• 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

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U N C T A D

ADAPTING CONSUMPTION

TAXES TO E-COMMERCE

IDENTIFY POTENTIAL NEW

INTERMEDIARIES

ISPs

credit card companies

banking and payment system providers

telecommunications companies

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U N C T A D

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

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U N C T A D

SEIZING THE E-COMMERCE

OPPORTUNITIES

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U N C T A D

MORE MOBILE

PLAYERS

NEW SERVICES

MORE EFFICIENT

ADMINISTRATION

ATTRACT PRODUCTIVE INVESTMENT

WIDER TAX BASE

MAINTAIN REVENUE LEVELS

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U N C T A D

PRINCIPLES OF E-TAXATION

• TECHNOLOGICAL NEUTRALITY

• EFFICIENCY

• CERTAINTY AND SIMPLICITY

• EFFECTIVENESS AND FAIRNESS

• FLEXIBILITY

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U N C T A D

WRAPPING-UP…

IMPORT TAXES

INCOME TAXES

COMSUMPTION

TAXES

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U N C T A D

THE WAY AHEAD

• International cooperation:

E-businesses escape notions of

residence and location

• Cooperation with business:

use solutions that do not

hinder technological advance

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U N C T A D

• PREPARE WHILE IMPACT REMAINS

TOLERABLE

• KEEP E-TAX LIGHT

• PARTICIPATE IN INTERNATIONAL DEBATE

• SEIZE THE OPPORTUNITIES

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