E-commerce and source-based income taxation pdf download

Key attributes of ecommerce with tax implications ability to establish public and private global communications systems disintermediation development of encrypted information increased integration of business functions greater flexibility in business organization fragmentation of economic activity technical features of internet with tax. Taxation of ecommerce and problems the taxation policies of countries based on territory and jurisdiction has begun to fail after improving e commerce. The theoretical foundations and rationale for sourcebased. In the context of taxing ecommerce earnings, a residencebased system raises a. The oecd secretariat, whose model tax convention serves as a basis for most bilateral tax treaties. A overview on ecommerce taxation in india myonlineca. Assessment of edba semester iii consists of, selfassessment questions. Study of the income tax, heads of income, tax audit, indirect tax, assessment of tax payable. Treasury department to recommend adopting an enhanced residence based system, on the grounds that in the world of cyberspace, it is often difficult, if not impossible, to apply traditional source concepts to link an item of income with a specific geographical location. Old and new issues in the taxation of electronic commerce jstor. E commerce companies9 the buying and selling of products and services by businesses and consumers through an electric medium, without using any paper documents.

Recent developments in the ecommerce taxation debate. Internationally, the two methods of taxation are source based taxation and residence based taxation. Issues, approaches and solutions in taxation of electronic. The lack of consistency between the features of ecommerce and international tax regime presents significant problems in taxing ecommerce income, as a result of which there is a serious undertaxation. Sourcebased taxation could be rendered obsolete by ecommerce charles e. Thus, taxation of business income on the basis of the source rule requires the presence, in the country of source, of a pe of the enterprise sought to be taxed. Rachel radford united kingdom inland revenue chair of. Taxation of ecommerce income the jurisdiction to impose taxes. It provides for levy, administration, collection and recovery of income tax. Chapter 4 when and how to charge sales tax on shipping.

Ecommerce and source based i ncome taxation introduction 1. Taxation and the exponential growth in ecommerce bdo. A resident of a country is generally taxed on its worldwide income, whereas a nonresident is taxed on income sourced incountry. However, there is nothing to suggest that the nature of ecommerce, nor the desire to see it develop, should exclude it from normal taxation. Nov 21, 2019 business connection relies on the concept of source based taxation, thus giving the source based country, a right to tax income arising from activities carried in that country. In section iv, some problems related to the difficulty in implementing income taxation on e commerce activities are considered. Jul 25, 2016 tax systems general apply one of two accepted bases of taxation, namely a residence based tax system. A customerfirst approach during unprecedented times. Taxation challenges in developing countries carnahan 2015.

Unique features of interest also add to the existing confusion. The current dearth of neutrality and basic fairness in ecommerce taxation legislation will become more painfully perceptible at the heart of the debate is the principle that states and other local governments have the right to tax goods sold within their. Prior to the finance act, 2020, a nonresident company was only subject to tax in nigeria if it had a fixed base in nigeria and the taxable profit was the profit attributable to that fixed base. In sourcebased taxation, the country has jurisdiction to tax income. This article analyzes the merits and disadvantages of various proposals for changes to the system of international income taxation of electronic commerce, ultimately concluding that only the most revolutionary. This thesis argues that sourcebased taxation is theoretically justifiable for income that arises from international transactions which are conducted in an electronic commerce environment. Download report of the committee on taxation of ecommerce. Thus, the main effect of the tax treaties is to reduce sourcebased taxation in favour of residencebased taxation of passive income. Ecommerce and sourcebased income taxation dale pinto on. Chapter 1 the complete sales tax guide for online sellers nexus by state included. Inland revenue authority of singapore, income tax guide on e commerce, published on 23 february 2001. It is an improper attempt to graft a consumption tax concept onto an income tax references baldwin and.

Global electronic commerce,4 which stated that source based taxation could be. The era of digitisation makes it difficult for tax systems to keep up, to identify new intangible services, to establish where these services are rendered and consumed, and to identify the parties to the transactions. First, it leads to the gradual elimination of intermediaries, such as wholesalers or local retailers. Income tax auren international comparison is a quarterly publication that provides you an overview of trends and international tax developments by comparing tax issues in different legislations around the world, that may affect those doing business in multiple lo. Indian e commerce committee report also, favors the adoption of this approach. While the thesis accepts these observations as being valid, nevertheless it will be argued that sourcebased taxation is theoretically justifiable for income that arises from international transactions that are conducted in an electronic commerce environment. The theoretical foundations and rationale for source based taxation, in e commerce and source based income taxation. Icoec3b3determination of permanent establishment in e. The main players in the debate on e commerce taxation have been the united states, the eu and the oecd. Ecommerce and sourcebased income taxation dale pinto. Myonlineca guide on service tax and vat provisions which is imposed on ecommerce in india. States apply their jurisdiction to tax, based on varying combinations of income source and residence principles. Electronic commerce involves the use of computer networks to facilitate the production.

At a minimum, i want students who have completed basic income tax to know these principles and to be able to apply them, i. One issue is that the traditional way of classifying supplies into supplies of goods and services regulated by the european community value added tax framework is stipulated by supplies. Taxation of electronic commerce in the european union citeseerx. Jun 02, 2003 the problems of source based taxation of e commerce have led the u. The overall emphasis or thesis of the article is to assert that tax havens, bank secrecy laws and electronic commerce present. Students who struggle with detailed computations in other subjects may be able to. Kanet the concept of source is central to the functioning of the current international tax system. The income tax act, 1961 is the charging statute of income tax in india. Taxation of electronic commerce in the european union. Electronic commerce, international taxation, and hitotsubashi.

In this research the impact of ecommerce on the imposition of income tax was briefly. Ecommerce and source based income taxation introduction 1. An organisation is considered to be a resident of india if. The first is sourcebased taxation, or territorial jurisdiction. Source rules, trade and income taxes, and electronic commerce. Ecommerce also challenges traditional company tax rules because businesses can. In sum, it is submitted that the proposed refundable withholding approach could provide a more stable and appropriate basis for source based taxation of international e commerce transaction than the current international tax system. E taxation a fastly moving field of egovernment specific governmental service simplification and integration of e taxation processes by use of information and communication technology support tax authority processes workflow systems electronic record management knowledge management. This intuition will serve well the student who wishes to take more tax classes. The role of taxation problems on the development of ecommerce. Recognition of server as a permanent establishment and nexus issues with regard to taxation of e commerce is researched in context of different tax jurisdictions. The advent of electronic commerce has caused many to question the continued viability of sourced based taxation. It sacrifices tax revenues in favour of administrative efficiency.

Recognition of server as a permanent establishment and nexus issues with regard to taxation of ecommerce is researched in context of different tax jurisdictions. Where the income or capital is taxed in the country of source, the country of residence has the obligation to give relief from double taxation. Reproduced with some abridgement with the permission of the canadian tax foundation from, charles e. E commerce and source based income taxation dale pinto on. While the thesis accepts these observations as being valid, nevertheless it will be argued that source based taxation is theoretically justifiable for income that arises from international transactions that are conducted in an electronic commerce environment. Ibfd publications bv international bureau of fiscal documentation. This function is problematical because the tax base is mobile. The international taxation systems, direct and indirect taxation, entity isolation and arms length principle applied to entity isolation problem, residentbased and sourcebased taxation, destination and origin principles are the general tax concepts and issues covered in.

Ecommerce makes international trade in particular so much easier, and so the debate about taxation moves up the international level, too. Tax policies affecting the internet have important implications for the continued growth of ecommerce and trade, as well as the future of both corporate and individual privacy. South african tax legislation is based on the principle of residence. Impact of ecommerce on taxation research india publications. Proposal for equalization levy income tax department. Then you can start reading kindle books on your smartphone, tablet, or computer. This article will examine the impact of tax havens and bank secrecy laws in administering australias taxation system, including an examination of the impact of electronic commerce.

Chapter 2 fundamental principles of taxation oecd ilibrary. Income tax guide on ecommerce itecguide dated 23 feb 2001 5 products, and make payments for purchases online. All members of the european union levy sourcebased income taxes. Enter your mobile number or email address below and well send you a link to download the free kindle app. Taxation of ecommerce is a major concern for international agencies and. In this type of sourcebased taxation, a country has jurisdiction to tax the income arising in its territory. Ecommerce and sourcebased income taxation book ibfd. The concepts of both source and residency are discussed in further detail in chapter 3 of this thesis. The role of taxation problems on the development of e. The worldwide nature of ecommerce transaction muddles the issue of jurisdiction which is a principle tenet of taxation.

Designing rules for the taxation of crossborder income. In india, direct tax is governed by the income tax act, 1961 the act, along with the income tax rules, 1962 the rules. Jones and basu 2002, ecommerce provides a qualitatively different challenge to tax regimes. Alternatives to the concept of permanent establishment. Overview of income tax on corporate income a resident company is taxed on its global income. The international taxation systems, direct and indirect taxation, entity isolation and arms length principle applied to entity isolation problem, residentbased and sourcebased taxation, destination and origin principles are the general tax concepts and issues covered in the content of article. Pdf global taxation of cross border ecommerce income.

International taxation of electronic commerce income. Apr 27, 2015 source of income the source based taxation rule provides authority to tax the income in the source country, i. Namely, the application of sourcebased taxation as commonly implemented in its conventional perception, i. This, together with mismatches in definition, accounting and income recognition rules, may result in double taxation or, in some cases, in a jurisdictional vacuum. Free tax books download ebooks online textbooks tutorials. In other words, the nexus for taxing profits derived by a foreign company in nigeria previously was based on its physical presence in nigeria. There has been so much euphoria with regard to indian ecommerce story and is on track to become the worlds fastest growing ecommerce market. The delivery of the products is made through normal physical delivery channels. The issues raised by ecommerce taxation are complex and the subject is controversial in nature because it has created serious conflict of interest between developed and developing nations. The primary sources of direct or income taxation are individuals, through a personal income tax pit, and companies through a corporate income tax cit. Taxation of electronic commerce in the european union charles e. Your checklist for a penaltyfree tax season important dates included. Income tax act, 1961 the act, along with the income tax rules, 1962 the rules.

Ecommerce poses significant challenges for existing tax rules. Basics and definitions income tax act, 1961 background, concept and mechanism of income tax definitions, concept of income, previous year, assessment year, distinction between capital and revenue receipts and expenditure, residential status basis of charge and scope of total income 2. In contrast to the principle of taxing income based on the source of the income, income. The committee on taxation of ecommerce examined the tax issues arising from the new business models employed in the digital economy, in particular issues relating to tax nexus rules under existing law and tax treaties, characterization of payments made for services and. Electronic commerce, 97 tax notes intl 223, 224 1997 referencing statements of robert. Chapter 3 how to use and accept resale certificates in your online business. South africa taxes local companies and residents on their worldwide income. Electronic age, 15 tax notes intl 1455, 146771 1997. A defense of source rules in international taxation mitchell a. To the extent the source ofincome is meant to reflect the spatial location of income. Definition of electronic commerce and overview of how it operates 1. To understand income tax, we need to have an understanding of the sources of tax law in the country.

The future of sourcebased taxation of the income of. Objective of this book is to explain the income tax administration in india. The future of sourcebased taxation of the income of multinational enterprises robert a. This article is discussing comparative approaches to the definitions of the ecommerce and epayment. Much of the discussion around corporate taxpayers breaks this group up into large taxpayers and small businesses. Concepts like permanent establishment, sale points, product and income classification that using in taxation process have been remained inadequate. Source rules, trade and income taxes, and electronic. Introduction this paper discusses application of the value added tax vat and the corporate income tax to electronic commerce ecommerce in the european union eu. Concepts like permanent establishment, sale points, product and income classification that using in.

A defense of source rules in international taxation. Taxation of ecommerce and problems the taxation policies of countries based on territory and jurisdiction has begun to fail after improving ecommerce. However, it is a product of early trade practices and support for it is deteriorating. Income taxes are levied at the place of source of income. Proponents of ecommerce taxation argue that it is unfair to traditional brickandmortar merchants for ecommerce not to be taxed. But while ecommerce has provided unprecedented opportunities to businesses and consumers, ecommerces rapidand continuingevolution has posed unique challenges to tax administrators. The first is the sourcebased taxation, or territorial jurisdiction. Electronic commerce ecommerce has allowed companies to transact business in an efficient, automated fashion as never before, using the internet. On direct tax issues, the allocation of income to a permanent. One of the most important effects of ecommerce has been to deemphasise the significance of. The international tax regime, which emerged in the 1920s, recognizes two basis for tax jurisdiction.

Even before e commerce, commentators opined that commercial practice had already largely eroded the pe concept. Arguments, approach and organisation of the thesis 1. Greent one of the functions of the corporate income tax is to raise revenue from foreign persons who earn income domestically through corporate intermediaries. If youre looking for a free download links of the economics of taxation pdf, epub, docx and torrent then this site is not for you. The technology that makes ecommerce what it is puts more of a spotlight on the possible challenges to effective taxation just how do you tax a cyberbusiness, or all those sales over the net. Source of income sourcebased taxation under the oecd model. This thesis argues that sourcebased taxation is theoretically justifiable for income that arises from international transactions which are conducted in an. Income tax being a direct tax on income and vat being an indirect tax imposed on every goods or services consumed, the two taxes essentially touch whatever income is generated, and whatever goods and services produced, consumed or. This thesis argues that source based taxation is theoretically justifiable for income that arises from international transactions which are conducted in an electronic commerce environment. For example, a foreign company based in a tax haven country is in receipt of advertising fees for publishing content of an indian resident taxpayer on its search engine. The advent of electronic commerce has caused many to question the continued viability of sourcedbased taxation.

Feb 24, 2016 e commerce and taxation final editing 1. Applied taxation module 1 tax 402 background to taxation because taxation is a subject grounded in law, there is usually a clearer distinction between right and wrong answers and more consistency in the expected layout of solutions than in other subjects. In sourcebased taxation, the country has jurisdiction to tax income sourced. Ecommerce is widely considered the buying and selling of products over the internet, but any transaction that is completed solely through electronic measures can be considered ecommerce. You can copy, download or print oecd content for your own use, and you can include excerpts from oecd. Highlevel meeting on electronic commerce, customs and taxation, brussels,june 2001 page 1 united nations conference on trade and development taxation in the age of e business protecting revenue, seizing new opportunities u n c t a d highlevel meeting on electronic commerce, customs and taxation, brussels,june 2001 page 2 united nations conference on trade and development. Tax systems general apply one of two accepted bases of taxation, namely a residence based tax system. In this regard, residents are taxed on their worldwide income. It is also viewed as a matter of survival for state and local governments, many of which depend on sales tax revenues for basic operating income. Certainly, ecommerce is a new and exciting development. Ecommerce on the internet will create new demands on taxation.