The greatest challenge to a tax regime today is its ability to adjust and adapt to a changing world. The dawning of the age of e- commerce is the latest and perhaps the most demanding of these challenges.
The challenges that e-commerce poses for governments are opportunities for business - the increased mobility e-commerce brings, the greater flexibility it offers to the way that transactions and communications are made, and the increased revenue opportunities that it creates. The Organisation for Economic Co- operation and Development (OECD) believes that, by the year 2000, the electronic commerce industry will have grown 10-fold, and be worth over pounds 123bn. A research company, Datamonitor, predicts that by the year 2003, more than 245,000 companies in Europe, and 640,000 companies in the US, will conduct Internet-based, fully-integrated, business-to- business e-commerce.
It has been estimated that the potential for tax avoidance could create a worldwide tax hole of pounds 8bn. As such, governments are devoting significant resources to looking at ways of modernising their tax systems. These changes could dramatically affect the growth of this rapidly developing industry.
The changes required are now being debated by the major industrialised countries, through the forum of the OECD. In an unprecedented move, the OECD is actively encouraging business involvement in the decision making process. Deloitte & Touche is playing an active role in the forum as a representative member of the working party for taxation and electronic commerce. As such, its representatives will continue to vigorously pursue what they believe to be a fair, sensible and workable solution, which does not stifle the growth of e-commerce. Deloitte and Touche's primary objective is to discourage all OECD countries from introducing burdensome substantive and compliance rules that would hamper the growth of the industry or invite non-compliance.
As international tax policy regarding global e-commerce is still in its infancy, industry has the opportunity to influence the taxation of a major new commercial medium. However, the ability to affect international tax policy requires an understanding of the mechanics of global e-commerce, the international tax issues that e- commerce raises, and the broad range of alternatives already put forward. No country has so far enacted any tax laws in this area. Governments say they are keen for e-commerce to develop, and invariably do not want their countries left behind. However, this does not mean that they do not have concerns and, in the tax arena, the threat that it poses. …