E-commerce and source-based income taxation pdf download

Ecommerce makes international trade in particular so much easier, and so the debate about taxation moves up the international level, too. 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. Recognition of server as a permanent establishment and nexus issues with regard to taxation of ecommerce is researched in context of different tax jurisdictions. It is an improper attempt to graft a consumption tax concept onto an income tax references baldwin and. 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. Objective of this book is to explain the income tax administration in india. Icoec3b3determination of permanent establishment in e. The advent of electronic commerce has caused many to question the continued viability of sourced based taxation. Thus, the main effect of the tax treaties is to reduce sourcebased taxation in favour of residencebased taxation of passive income. States apply their jurisdiction to tax, based on varying combinations of income source and residence principles. 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. Electronic commerce ecommerce has allowed companies to transact business in an efficient, automated fashion as never before, using the internet. The delivery of the products is made through normal physical delivery channels.

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. Even before e commerce, commentators opined that commercial practice had already largely eroded the pe concept. The first is the sourcebased taxation, or territorial jurisdiction. At a minimum, i want students who have completed basic income tax to know these principles and to be able to apply them, i. The concepts of both source and residency are discussed in further detail in chapter 3 of this thesis. One of the most important effects of ecommerce has been to deemphasise the significance of. Taxation of ecommerce income the jurisdiction to impose taxes. In the context of taxing ecommerce earnings, a residencebased system raises a. 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. In this research the impact of ecommerce on the imposition of income tax was briefly. To the extent the source ofincome is meant to reflect the spatial location of income.

However, there is nothing to suggest that the nature of ecommerce, nor the desire to see it develop, should exclude it from normal taxation. Sourcebased taxation could be rendered obsolete by ecommerce charles e. South africa taxes local companies and residents on their worldwide income. Ecommerce and sourcebased income taxation dale pinto on. Study of the income tax, heads of income, tax audit, indirect tax, assessment of tax payable. Apr 27, 2015 source of income the source based taxation rule provides authority to tax the income in the source country, i. The income tax act, 1961 is the charging statute of income tax in india. Ecommerce poses significant challenges for existing tax rules.

Chapter 2 fundamental principles of taxation oecd ilibrary. The role of taxation problems on the development of ecommerce. Tax systems general apply one of two accepted bases of taxation, namely a residence based tax system. The main players in the debate on e commerce taxation have been the united states, the eu and the oecd. A customerfirst approach during unprecedented times. Electronic commerce, 97 tax notes intl 223, 224 1997 referencing statements of robert. 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 role of taxation problems on the development of e. Electronic age, 15 tax notes intl 1455, 146771 1997. This intuition will serve well the student who wishes to take more tax classes. Taxation of ecommerce is a major concern for international agencies and. Certainly, ecommerce is a new and exciting development.

In sourcebased taxation, the country has jurisdiction to tax income. In other words, the nexus for taxing profits derived by a foreign company in nigeria previously was based on its physical presence in nigeria. 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. Taxation challenges in developing countries carnahan 2015. E commerce companies9 the buying and selling of products and services by businesses and consumers through an electric medium, without using any paper documents. Source of income sourcebased taxation under the oecd model. Myonlineca guide on service tax and vat provisions which is imposed on ecommerce in india. A resident of a country is generally taxed on its worldwide income, whereas a nonresident is taxed on income sourced incountry. Definition of electronic commerce and overview of how it operates 1. The theoretical foundations and rationale for sourcebased. The primary sources of direct or income taxation are individuals, through a personal income tax pit, and companies through a corporate income tax cit.

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. Electronic commerce, international taxation, and hitotsubashi. 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. Global electronic commerce,4 which stated that source based taxation could be. Inland revenue authority of singapore, income tax guide on e commerce, published on 23 february 2001. Free tax books download ebooks online textbooks tutorials.

First, it leads to the gradual elimination of intermediaries, such as wholesalers or local retailers. The oecd secretariat, whose model tax convention serves as a basis for most bilateral tax treaties. Pdf global taxation of cross border ecommerce income. Taxation of electronic commerce in the european union. 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. In sourcebased taxation, the country has jurisdiction to tax income sourced. 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.

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 future of sourcebased taxation of the income of multinational enterprises robert a. The theoretical foundations and rationale for source based taxation, in e commerce and source based income taxation. Issues, approaches and solutions in taxation of electronic. Taxation of electronic commerce in the european union charles e. Feb 24, 2016 e commerce and taxation final editing 1. The advent of electronic commerce has caused many to question the continued viability of sourcedbased taxation. Jun 02, 2003 the problems of source based taxation of e commerce have led the u. Ecommerce on the internet will create new demands on taxation. Designing rules for the taxation of crossborder income.

Your checklist for a penaltyfree tax season important dates included. This article is discussing comparative approaches to the definitions of the ecommerce and epayment. Jul 25, 2016 tax systems general apply one of two accepted bases of taxation, namely a residence based tax system. 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. The international tax regime, which emerged in the 1920s, recognizes two basis for tax jurisdiction.

An organisation is considered to be a resident of india if. Chapter 3 how to use and accept resale certificates in your online business. Recent developments in the ecommerce taxation debate. International taxation of electronic commerce income. In this regard, residents are taxed on their worldwide income. Overview of income tax on corporate income a resident company is taxed on its global income. Income tax act, 1961 the act, along with the income tax rules, 1962 the rules. A overview on ecommerce taxation in india myonlineca. 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. Taxation of electronic commerce in the european union citeseerx. 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.

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. Ecommerce and sourcebased income taxation dale pinto. Rachel radford united kingdom inland revenue chair of. It provides for levy, administration, collection and recovery of income tax. 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. But while ecommerce has provided unprecedented opportunities to businesses and consumers, ecommerces rapidand continuingevolution has posed unique challenges to tax administrators. You can copy, download or print oecd content for your own use, and you can include excerpts from oecd. E commerce and source based income taxation dale pinto on. Arguments, approach and organisation of the thesis 1. The first is sourcebased taxation, or territorial jurisdiction. Taxation and the exponential growth in ecommerce bdo. 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.

In section iv, some problems related to the difficulty in implementing income taxation on e commerce activities are considered. 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. Download report of the committee on taxation of ecommerce. Unique features of interest also add to the existing confusion. It sacrifices tax revenues in favour of administrative efficiency. 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. Electronic commerce involves the use of computer networks to facilitate the production. Impact of ecommerce on taxation research india publications. Taxation of ecommerce and problems the taxation policies of countries based on territory and jurisdiction has begun to fail after improving ecommerce. The future of sourcebased taxation of the income of.

This thesis argues that sourcebased taxation is theoretically justifiable for income that arises from international transactions which are conducted in an electronic commerce environment. Chapter 1 the complete sales tax guide for online sellers nexus by state included. Kanet the concept of source is central to the functioning of the current international tax system. Reproduced with some abridgement with the permission of the canadian tax foundation from, charles e. 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. 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.

South african tax legislation is based on the principle of residence. 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. Assessment of edba semester iii consists of, selfassessment questions. A defense of source rules in international taxation mitchell a. 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. Greent one of the functions of the corporate income tax is to raise revenue from foreign persons who earn income domestically through corporate intermediaries. Proponents of ecommerce taxation argue that it is unfair to traditional brickandmortar merchants for ecommerce not to be taxed. All members of the european union levy sourcebased income taxes. 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.

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. On direct tax issues, the allocation of income to a permanent. This function is problematical because the tax base is mobile. 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. Much of the discussion around corporate taxpayers breaks this group up into large taxpayers and small businesses. 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. 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. To understand income tax, we need to have an understanding of the sources of tax law in the country.

Alternatives to the concept of permanent establishment. In contrast to the principle of taxing income based on the source of the income, income. Ecommerce and sourcebased income taxation book ibfd. Enter your mobile number or email address below and well send you a link to download the free kindle app. In india, direct tax is governed by the income tax act, 1961 the act, along with the income tax rules, 1962 the rules. Internationally, the two methods of taxation are source based taxation and residence based taxation. Income tax guide on ecommerce itecguide dated 23 feb 2001 5 products, and make payments for purchases online. Students who struggle with detailed computations in other subjects may be able to. 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. Ecommerce and source based i ncome taxation introduction 1. The worldwide nature of ecommerce transaction muddles the issue of jurisdiction which is a principle tenet of taxation. Proposal for equalization levy income tax department. 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.

Jones and basu 2002, ecommerce provides a qualitatively different challenge to tax regimes. 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. There has been so much euphoria with regard to indian ecommerce story and is on track to become the worlds fastest growing ecommerce market. Ecommerce also challenges traditional company tax rules because businesses can. Ecommerce and source based income taxation introduction 1.

This, together with mismatches in definition, accounting and income recognition rules, may result in double taxation or, in some cases, in a jurisdictional vacuum. In this type of sourcebased taxation, a country has jurisdiction to tax the income arising in its territory. Source rules, trade and income taxes, and electronic. Concepts like permanent establishment, sale points, product and income classification that using in.

Namely, the application of sourcebased taxation as commonly implemented in its conventional perception, i. However, it is a product of early trade practices and support for it is deteriorating. 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. A defense of source rules in international taxation. Source rules, trade and income taxes, and electronic commerce. The overall emphasis or thesis of the article is to assert that tax havens, bank secrecy laws and electronic commerce present. Concepts like permanent establishment, sale points, product and income classification that using in taxation process have been remained inadequate. Ibfd publications bv international bureau of fiscal documentation. Taxation of ecommerce and problems the taxation policies of countries based on territory and jurisdiction has begun to fail after improving e commerce. Old and new issues in the taxation of electronic commerce jstor.