Abstract
A critical point at issue is the impact of technology on taxation and the urgent necessity to devise an effective tax system relevant to this issue. The OECD has discussed the possibility of a ‘virtual permanent establishment’ which may be applied to eCommerce transactions (Op cit OECD Tax Policy Studies E-Commerce: Transfer Pricing and Business Profits Taxation No. 10 (2005) OECD. France, p144).
Other OECD alternatives in respect of ‘permanent virtual establishment’ are acknowledgement of ‘virtual fixed place of businesses’, (Refer to footnote 2 [p350]) ‘virtual agents’ (Refer to footnote 3 [p350]) and ‘on-site business presence’ (Refer to footnote 4 [p350]).
A further alternative is the possibility of the virtual world constituting a jurisdiction in its own right, allowing all taxes to be imposed and collected by an independent third party and then distributed to all participating jurisdictions in accordance with a pre-accepted distribution formula. However, such solutions, including the OECD’s proposed alternatives for a ‘virtual permanent establishment’, require considerable international co-operation and co-ordination. With the proliferation of eCommerce political harmony may be impelled as tax evasion and tax avoidance spiral out of control.
It is futile to implement a taxing system or regime which cannot be effectively enforced, or where the compliance and administrative costs outweigh the benefits received in regards to taxation recovered.
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- 1.
op cit OECD Tax Policy Studies E-Commerce: Transfer Pricing and Business Profits Taxation No. 10, p144.
- 2.
According to the OECD “[t]he ‘Virtual Fixed Place of Business PE’ would create a permanent establishment when the enterprise maintains a web site on a server of another enterprise located in a jurisdiction and carries on business through that web site. The place of business is the web site, which is virtual…”.
[op cit OECD Tax Policy Studies E-Commerce: Transfer Pricing and Business Profits Taxation , p144].
- 3.
According to the OECD “‘the Virtual Agency PE’, would seek to extend the existing dependent agent permanent establishment concept to electronic equivalent of a dependent agent…”.
[op cit OECD Tax Policy Studies E-Commerce: Transfer Pricing and Business Profits Taxation , p144].
- 4.
According to the OECD the “‘On-site Business Presence PE’ proposes a new threshold for source taxation which does not depend on the existence of a fixed place of business at the disposal of the enterprise or on the traditional view of a business activity taking place within a jurisdiction. Rather, it looks at the economic presence of an enterprise within a jurisdiction in circumstances where the foreign enterprise provides what the proponents of that approach view as on-site services or other business interface (which could be a computer or phone interaction) at the customer’s location…”.
[op cit OECD Tax Policy Studies E-Commerce: Transfer Pricing and Business Profits Taxation , p145].
Bibliography
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OECD Tax Policy Studies. 2005. E-Commerce: Transfer pricing and business profits taxation No. 10. Paris: OECD.
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Bardopoulos, A.M. (2015). Various Recommended Solutions. In: eCommerce and the Effects of Technology on Taxation. Law, Governance and Technology Series, vol 22. Springer, Cham. https://doi.org/10.1007/978-3-319-15449-7_28
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DOI: https://doi.org/10.1007/978-3-319-15449-7_28
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