Electronic Commerce and Taxation: Toll Booths on the InfoBahn?

By Ormrod, Chuck | CMA - the Management Accounting Magazine, April 1998 | Go to article overview

Electronic Commerce and Taxation: Toll Booths on the InfoBahn?


Ormrod, Chuck, CMA - the Management Accounting Magazine


The virtual world is posing some major challenges for tax authorities, and the stakes are enormous.

If you're having trouble keeping up with new developments in international communications technology and electronic commerce, you can imagine the plight of international tax policy makers. Technology, especially intangible property such as software, can be created, marketed, shipped and paid for over the Internet without any of the standard, auditable traces of the transaction which tax authorities traditionally use. The virtual nature of these transactions renders them "invisible."

Indeed, the very nature of the internet strains the concepts and definitions which tax authorities use to determine what kind of transaction has taken place, whether or not it is taxable, and in which jurisdiction. For tax authorities around the world, the loss of tax I revenue on Internet transactions is regarded as an issue of major concern.

The Internet is international

The Internet is a freely-accessible, worldwide network which companies are using to advertise their products, take orders, and, increasingly, to deliver and to accept payment for goods and services. Internet technology has also spawned intranets and extranets, which provide enhanced intra-company and company-to-company services. As a result of technological improvements and expanded markets, many companies will see the bulk of their future revenue growth arise from international transactions conducted electronically.

The Internet knows no international boundaries, and allows unrestricted access to as many goods and services as can possibly be made available over the medium. The "invisibility" of Internet sales is true of both national and international transactions.

Existing principles of international tax law are difficult to apply in this virtual domain since they generally assume that an international transaction will involve a physical exchange at some point in the transaction. In the new electronic business environment, suppliers and customers can conclude agreements without regard to physical or national frontiers.

Critical tax concepts challenged

"Permanent establishment" is the standard, international legal criterion used to determine a company's tax status in a given jurisdiction by limiting taxation based on residency. Traditional residence concepts are based on criteria such as physical presence, personal and economic relationships, incorporation, and place of central mind and management. Residency, however, is just one of many concepts which do not appear to encompass the diffuse nature of the Internet or electronic commerce

The application of these concepts to the virtual world is uncertain. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Electronic Commerce and Taxation: Toll Booths on the InfoBahn?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.