OECD 6th Annual Global Forum on Taxation of E-Commerce

1
6th Annual Global Forum
TAXATION ASPECTS OF
ELECTRONIC COMMERCE
Addressing the Challenges and Opportunities
‘The state of play’
September 2001

226-Sep-01 6th Global Forum
The role of the OECD: e-commerce taxation
 Facilitating an international dialogue
which…
 brings together governments and business
to…
 build an international consensus
where...
 e-commerce flourishes and tax sovereignty and
neutrality of treatment is maintained

We have some basic principles for guidance
 Solutions must meet the twin challenges
– Fostering economic growth;
while
– Safeguarding revenues
 Guiding principle - neutrality
– Neither more nor less favourable treatment
 International consensus desirable

But first some context before delving in
 While estimates vary considerably...

e-commerce context 1
 e-commerce is becoming mainstream business
 It is a global phenomena

e-commerce context 2
 Most (~ 90%) are business-to-business (B2B)
transactions
 Most (~ 80%) concern physical products
$6,335
$1,267
$454 $91
Total B2B
Digital B2B
Total B2C
Digital B2C
2004 forecast

Ottawa Tax Framework (October 1998)
 New opportunities for taxpayer service were
identified; and
 Agreement that tax principles for e-commerce are
the same as for conventional commerce:
– Neutrality
– Efficiency
– Certainty and simplicity
– Effectiveness and fairness
– Flexibility

Ottawa Framework Conditions
Consensus was attained on:
 Implementation through existing tax rules
– No new or discriminatory taxes needed; though
– Some adaptation may be required
 Maintaining fiscal sovereignty
– Sharing of tax base via existing treaty approaches
– No double nor unintentional non-taxation
 Neutrality of approach (Effective rather than Literal)

A global dialogue has been initiated
Global issues require global solutions
 New working partnership established with
– Member countries
– Non-member economies
– Business
 New methods
– Technical Advisory Groups (TAGs)
 Bringing all parties to the table as equals

OECD e-commerce tax work has focussed on:
 1. Direct (income) taxes
 2. Consumption taxes
 3. Tax administration

1. Direct (income) tax - outcomes
 Clarification of the P.E. concept
– A web site alone cannot be a P.E.
– Web hosting arrangements (Server) do not result in a
P.E. for enterprise carrying on business through web
site
– Human intervention is not a requirement to constitute a
P.E.

 P.E. at the location of the server only if:
– Server is at the disposal of the enterprise
– Enterprise carries on business functions through it for
a sufficient period of time
– Functions performed are an essential and significant
part of business activity going beyond auxiliary and
preparatory activities
 Income allocation issues that result are being
explored by the Business Profits TAG - ongoing
work.

 Income (Treaty) Characterisation TAG considered:
– Downloading of a digital product (copyright issues)
– Transfer of know-how
– Time-limited use of digital products (lease?)
– Mixed payments (predominant part to generally
determine treatment)
 TC TAG reached its conclusions which were
accepted.
– The treaty commentary text to implement this is being
finalised by Working Party 1.
– 28 Categories of electronic transactions considered

2. Consumption taxes - outcomes
 Place of consumption scoped...
– B2B: business presence
– B2C: usual place of residence
 Tax collection mechanisms suggested
– B2B: reverse charge
– B2C: simplified registration (if considered necessary)
– Technological based solution possible longer-term

2. Consumption taxes - on-going
 Explore technology-based collection mechanisms
 Practical means of verification for the place/status of
the customer
 Simplification of tax compliance requirements
 Promoting administrative international co-operation

3. Tax administration
 Administrative issues consist of:
– Compliance challenges; and
– Taxpayer service opportunities
 Both discussed at Montreal in June (www.ae-tax.ca)
 Compliance challenges such as:
– Identity issues - who, where
– Access to information - when, what (transparency)
– Tax collection mechanisms
– International co-operation

3. Tax administration
 Opportunities abound...
– Providing greater access to information
– Registration and filing simplification
– Electronic assessment and collection
– Secure ways of paying taxes
 Sharing best practice in administration
(www.fsmke.org)

Outcomes
 Comprehensive reports published (February 2001)
detailing full range of emerging conclusions and
recommendations:
– P.E. - revised Commentary language
– Income Characterisation - TAG conclusion agreed
– Allocation to PE - discussion drafts from TAG
– Consumption Tax - full report for comment
– Administration - report for comment
– Plus reports/papers from all TAGs

Next steps
 Continued efforts toward international consensus in
various fields - particular focus on CT issues
 Continued commitment to dialogue with business
and non-member economies
– TAGs: Business Profits, Consumption Tax &
Compliance Information and Documentation
 Aim to progress the tax framework implementation
requirements through 2001-2003

20
Stuart Hamilton stuart.hamilton@oecd.org
http://www.oecd.org/subject/e_commerce/
TAXATION ASPECTS OF
ELECTRONIC COMMERCE
Addressing the Challenges and Opportunities

OECD 6th Annual Global Forum on Taxation of E-Commerce

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (14)

Similar to OECD 6th Annual Global Forum on Taxation of E-Commerce

Similar to OECD 6th Annual Global Forum on Taxation of E-Commerce (20)

OECD 6th Annual Global Forum on Taxation of E-Commerce