TAXATION IN THE AGE OF

UNCTAD United Nations Conference on Trade and Development TAXATION IN THE AGE OF E-BUSINESS Protecting revenue, seizing new opportunities High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development CHALLENGES OF E-TAXATION LOCATION JURISDICTION OF ACTIVITIES ISSUES ANONYMOUS IDENTIFICATION USERS ISSUES LESS ENFORCEMENT INTERMEDIARIES ISSUES High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development TAXATION OF IMPORTED GOODS High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development For goods which are traded on-line delivered physically No new issues: taxation at the border For goods that are traded and delivered electronically (digitizable goods) Problem of: - identification of taxpayer, - definition of jurisdiction, - enforcement of payment Books, music, software,etc High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development 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 142,502 3.9 0.8 0.6 Africa 50,386 1.9 0.4 0.3 Caribbean 650,493 1.3 0.1 0.1 Dev Asia 4,828,654 20.8 0.3 0.2 Developed 547,205 10.9 0.4 0.3 E Europe 560,131 5.8 0.6 0.4 Lat Amer 128,352 1.9 0.3 0.2 M East/N Afr World 6,907,724 9.2 0.4 0.3 High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development DIGITIZABLE GOODS: POLICY IMPLICATIONS • Revenue implications are not substantial • Heavy implementation burden of e-taxes CONTINUE CURRENT MORATORIUM High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development INCOME TAXATION High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development FUNDAMENTAL PRINCIPLES OF INCOME TAXATION • PERMANENT ESTABLISHMENT • RESIDENCE-BASED TAXATION • SOURCE-BASED TAXATION High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development RESIDENCE-BASED TAXATION • Applied in the jurisdiction of the place of residence of the person/business SOURCE-BASED TAXATION • Applied in the jurisdiction where economic activity takes place, if permanent establishment is determined (“NEXUS”) High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development 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? High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 10 UNCTAD United Nations Conference on Trade and Development CONSUMPTION TAXATION High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 11 UNCTAD United Nations Conference on Trade and Development • 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 High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 12 UNCTAD United Nations Conference on Trade and Development ADAPTING CONSUMPTION TAXES TO E-COMMERCE IDENTIFY POTENTIAL NEW INTERMEDIARIES ISPs credit card companies banking and payment system providers telecommunications companies High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 13 UNCTAD United Nations Conference on Trade and Development 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 High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 14 UNCTAD United Nations Conference on Trade and Development SEIZING THE E-COMMERCE OPPORTUNITIES High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 15 UNCTAD United Nations Conference on Trade and Development MORE MOBILE PLAYERS ATTRACT PRODUCTIVE INVESTMENT NEW SERVICES WIDER TAX BASE MORE EFFICIENT ADMINISTRATION MAINTAIN REVENUE LEVELS High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 16 UNCTAD United Nations Conference on Trade and Development PRINCIPLES OF E-TAXATION • TECHNOLOGICAL NEUTRALITY • EFFICIENCY • CERTAINTY AND SIMPLICITY • EFFECTIVENESS AND FAIRNESS • FLEXIBILITY High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 17 UNCTAD United Nations Conference on Trade and Development WRAPPING-UP… INCOME TAXES COMSUMPTION TAXES IMPORT TAXES High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 18 UNCTAD United Nations Conference on Trade and Development THE WAY AHEAD • International cooperation: Ebusinesses escape notions of residence and location • Cooperation with business: use solutions that not hinder technological advance High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 19 UNCTAD United Nations Conference on Trade and Development • PREPARE WHILE IMPACT REMAINS TOLERABLE • KEEP E-TAX LIGHT • PARTICIPATE IN INTERNATIONAL DEBATE • SEIZE THE OPPORTUNITIES High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 20 [...]... Customs and Taxation, Brussels,June 2001 Page 13 UNCTAD United Nations Conference on Trade and Development 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 High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June... Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 18 UNCTAD United Nations Conference on Trade and Development THE WAY AHEAD • International cooperation: Ebusinesses escape notions of residence and location • Cooperation with business: use solutions that do not hinder technological advance High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page... Page 14 UNCTAD United Nations Conference on Trade and Development SEIZING THE E-COMMERCE OPPORTUNITIES High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 15 UNCTAD United Nations Conference on Trade and Development MORE MOBILE PLAYERS ATTRACT PRODUCTIVE INVESTMENT NEW SERVICES WIDER TAX BASE MORE EFFICIENT ADMINISTRATION MAINTAIN REVENUE LEVELS High-level Meeting... and Taxation, Brussels,June 2001 Page 16 UNCTAD United Nations Conference on Trade and Development PRINCIPLES OF E -TAXATION • TECHNOLOGICAL NEUTRALITY • EFFICIENCY • CERTAINTY AND SIMPLICITY • EFFECTIVENESS AND FAIRNESS • FLEXIBILITY High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 17 UNCTAD United Nations Conference on Trade and Development WRAPPING-UP… INCOME... countries imposing VAT –Elimination of intermediaries High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 12 UNCTAD United Nations Conference on Trade and Development ADAPTING CONSUMPTION TAXES TO E-COMMERCE IDENTIFY POTENTIAL NEW INTERMEDIARIES ISPs credit card companies banking and payment system providers telecommunications companies High-level Meeting on Electronic... CONSUMPTION TAXATION High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 11 UNCTAD United Nations Conference on Trade and Development • 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... Brussels,June 2001 Page 19 UNCTAD United Nations Conference on Trade and Development • PREPARE WHILE IMPACT REMAINS TOLERABLE • KEEP E-TAX LIGHT • PARTICIPATE IN INTERNATIONAL DEBATE • SEIZE THE OPPORTUNITIES High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page 20 ... Trade and Development RESIDENCE-BASED TAXATION • Applied in the jurisdiction of the place of residence of the person/business SOURCE-BASED TAXATION • Applied in the jurisdiction where economic activity... domestic) Requires the cooperation of intermediaries • E-COMMERCE CHALLENGE –Incentive to relocate outside countries imposing VAT –Elimination of intermediaries High-level Meeting on Electronic... INCOME TAXATION High-level Meeting on Electronic Commerce, Customs and Taxation, Brussels,June 2001 Page UNCTAD United Nations Conference on Trade and Development FUNDAMENTAL PRINCIPLES OF INCOME TAXATION