The rationale behind this research proposal presentation involves the process of E-commerce and Taxation as how the taxes effect e-commerce within the global economy as the Internet Tax Freedom Act, provides ban on the state taxation of Internet transactions and that the legislators are expected to vote on whether to extend the ban or to make it permanent within issues and that the decision will affect e-commerce businesses. This issue impacts on any business selling goods and services over the Internet that the Internet taxation issue doesn't directly affect e-commerce in the global economy as e-commerce has grown and struggled to establish itself as the Act prohibits taxes on Internet access, taxes on specific products sold online that are not taxed offline and duplicate taxes on transactions that the states could tax. Electronic commerce tax administration in
The proposal will examine the growth of electronic commerce in commercial activities and administrative issues that arise from electronic commerce and adopt the important methods to address certain issues. The research aims and objectives will help shape the policy positions to participate in the consultative process in order to appreciate the opportunity to discuss such views.
AIMS AND OBJECTIVES
The aims and objectives for this research proposal will need to understand how e-commerce and taxation works in effect to the global economy in Canada with support to TEI as this presentation aims to give a clear emphasis of e-commerce taxation as to what it brings forth for the positive integration of its aspects within the reality of achieving a better global economy in e-commerce business success and opportunities. The Canadian government should work to develop the necessary legal framework for electronic commerce to ensure effective intellectual property protection in the digital environment; clear rules on jurisdiction, applicable law, and enforcement and on liability and contractual obligations involved in electronic commerce and a fair, equitable tax regime for electronic commerce.
1. To develop a Strategy for E-Commerce
2. To provide and adopt guiding principles about E-Commerce
3. To ensure that requirements for electronic commerce figure notably in its policies and programs.
4. To use Web site to advertise to residents and non-residents of
5. To approach appropriate organizations to arrange electronic links to the Web site to provide users with information on the tax implications of having business on the Internet.
6. To be active in the workings of the OECD to address electronic transactions. Priority should be given to considering and applying existing concepts to electronic commerce before choosing to pursue alternative or new concepts with respect to changes to the model tax treaty are known and the need to address the taxation of electronic commerce.
7. To integrate Electronic Commerce and Process Redesign
There must continue to redesign and re-engineer its business processes in combination with electronic commerce initiatives for program and service delivery. The result may be fundamentally new approaches to delivery in some areas.
8. To have a Strategic Approach to Electronic Delivery Channels
There needs to consider developing program and service delivery design principles that promote the strategic use of electronic deliver channels and should promote the acquisition of skills and competencies in selecting and using electronic delivery channels strategically.
9. To enhance Tax Compliance
The country should continue to explore the strategic use of the Internet and other emerging technologies and techniques to enhance tax compliance and should maintain a current awareness of software available to ease the burden of tax compliance on small businesses.
VALUE OF RESEARCH
The value of research is surprising arising from electronic commerce of the dot.com economy has not altered the new reality of the tax world. It is critical both from the perspective of growth, innovation and competitiveness and from that of maintaining a viable and effective basis for the state that people do the right thing. The hallmark of a global economy is greater mobility of economic transactions and economic agents in enjoying choice for purchases of goods and services to live in communities that best meet the needs within the outcome of greater choice is efficient economies and better living standards.
Approaches to E-Taxation
Tax electronic commerce is a controversial subject as there are many governments and international organizations issued reports on the taxation of electronic commerce and a large academic and popular literature developed.
Don't Tax E-commerce
Tax It Like Anything Else
In sharp contrast, most governments, led by the OECD, argue that it is critical to develop and enforce effective methods of taxing electronic transactions, both in order to ensure a level playing field for bricks-and-mortar competitors and to be able to finance needed public-sector activities. The OECD has argued that taxation should be neutral and equitable between all forms of commerce, that compliance and administrative costs should be minimized and that the potential for tax evasion and avoidance should be minimized. General criteria for a good tax system are usually easy to state, and even to agree to. Implementing them effectively, however, can be quite another matter. Some have suggested that this aim may be accomplished only by increased co-operation among national and sub-national governments, and perhaps even by the adoption of explicit base-sharing arrangements (Smith 1998).
Really Tax E-commerce
Finally, a few proponents of taxing e-commerce have even taken the view that electronic commerce offers not so much a challenge to the sustained productivity of the existing tax system as an opportunity to exploit a new one--the so-called bit tax (Cordell et al. 1997). Bit-tax supporters recommend levying a small charge on the transmission of information by electronic means as others suggest limiting such taxation only to encrypted information or taxing the capacity to receive such information. Whether the idea is to impose a tax on the flow through the pipeline, the size of the connection, it has little merit. It may be politically attractive to generate a lot of revenue by levying a small charge on a large flow, not least when much of the tax would likely be collected from a few large companies. Indeed, it may even be argued that the incidence of such a tax might be progressive to the extent there is a so-called digital divide, with the better-off in society making much more use of electronic commerce than the less fortunate. Canada need to adjust its tax system to the realities of e-commerce (Repss 2000) within the issued major reports on the subject, as have the European Union and the OECD began requiring that any non-EU business that supplies online services to consumers resident in the EU must collect value-added tax (VAT) at the rate applicable in the resident state (Gnaedinger 2003).
Tanzi and Schuknecht (2000) argue that citizens have, on the whole, received relatively little value for expansions of the state sector much beyond 30 percent of GDP. They may be right unless major changes are made soon in pension and health systems, demography alone seems likely to lead to still further expansion of the state in many countries.
The VAT issue has been most discussed in the European Union, as has the retail sales tax in the
Electronic commerce will greatly increase the mobility of goods consumption as shoppers search websites for bargains far away, and as goods are delivered by private shippers such as FedEx and UPS. E-commerce will enhance the mobility of services consumption as households buy education, entertainment, insurance, legal, and accounting services from distant suppliers. Falling airfares will enable households to spend more of their tourist and health dollars in distant locations. Investment income will become highly mobile as pension funds and brokerage firms develop worldwide networks and households seek to diversify their portfolios. The essential point is to emphasize has to do with tax convergence between national systems. If tax systems designed on a blank slate, the most practical way to accommodate e-commerce would entail adoption of the origin principle of border tax adjustments for retail sales, value-added and similar consumption taxes. Under the origin principle, taxes are not imposed on imports of goods and services, but they are imposed on exports. From an administrative standpoint, it is much easier to collect taxes on firms at the location of production than on households at the place of delivery. It is even truer for services arriving by internet at the computers of individual buyers. However, tax systems have inertia because they affect capital values, location decisions and political interests.
Conduct a review of literature on E-commerce and Taxation as to how taxes affect e-commerce in
The survey will be in a form of questionnaire procedure and will be developed with set of questions that will have to focus on the research objectives as discussed above. The questionnaire will be answered by 100 Canadian e-commerce suppliers and retailers within as this could give realistic data as to how taxes really work in pursuance of e-commerce within the global economy. The questions in the questionnaire will seek to evaluate the importance and the function of taxes in e-commerce business transactions as the questionnaire will be distributed to the randomized sample of Canadian respondents across the cities of
May 2006: Draft the Research Proposal document
June 2006: Review of Literature
July 2006: Assessment of Research Methodology and agree the conduction
August 2006: Administration of the research process to support the essential data needed for the completion of the study
September 2006: Do the case study and the survey
October 2006: Compile and Administer the Questionnaire
November 2006: Collection of questionnaire and data analysis
December 2006: Final Writing of the Report Project
It is in the revenue system that has been widened by the expansion of e-commerce and that gives rise both to a range of estimates of potential revenue losses (Goolsbee 2001; Bruce and Fox 2000) and to the need for radical simplification and harmonization of state and local sales taxes if they are to survive (McLure 2000). Canada suffers from some of the same problems in collecting taxes on taxable goods purchased out of province but has to some extent been saved by its geography and its courts. Most Canadians outside of the National Capital Region do not live near a provincial border and courts have been kinder to tax collectors, the provincial sales tax administrators thus start from a considerably stronger position than their
Thus, one way to deal with problems may be to reduce the importance presently attached to the characterization of income in determining its tax burden. Under present conditions, distinguishing a royalty from a service fee from interest from dividends from a management fee is often an exercise in futility, with the best lawyer and accounting firm winning. Nonetheless, considerable attention has been paid, notably in the OECD working groups. The importance of this distinction is that profits are, under existing rules, primarily subject to tax in the country of source, while royalties are taxed in the country of residence, although subject to source withholding. Although some degree of agreement has been reached in principle on some of these matters at the OECD, experience demonstrates that it can be a very long way from principle to practice in international tax matters of how to source income from e-commerce. Some tax authorities have attempted to reformulate source rules to capture cyber income (Li 1999). The new OECD commentary, says that servers constitute a permanent establishment "in some circumstances", but websites do not. (Li 2000) Revenue may not be the main issue for economists, who focus more on the impact of taxes regardless of who they are paid to, but it certainly matters to policymakers that would gain from extending residence concepts to encompass e-commerce income, favor extensions of the concept.
As Doernberg et al. (2001, 388) put it:
E-commerce can be intangible, multi-jurisdictional and easily located in tax havens. It poses great challenges to tax authorities. Effective administration relies on the tax authorities' power and means to obtain information in order to assess a taxpayer's tax liability by identifying taxpayers, identifying and verifying transactions, and establishing a link between taxpayer and the transactions. E-commerce has the potential to make it difficult or impossible for tax authorities to obtain information or to enforce tax collection. Taxpayers may disappear in cyberspace, reliable records and books may be difficult to obtain and taxing points and audit trails may become obscure. Perhaps, the real danger of e-commerce's effect on taxation may lay not so much in the erosion of the tax base as in the erosion of privacy as governments take defensive action (Cockfield 2002). The creation of an international fiscal leviathan to swallow up the world's tax base and divide it among participating countries carries with it the risk of authoritarian misuse, as do lesser moves in the same direction to harmonize and unify tax systems across jurisdictional boundaries.
Asher, M. "Globalization and Fiscal Policy: Rationale for Reform in
Beck,Hanno, and Aloys Prinz. 1997. "Should All the World Be Taxed? Taxation and the Internet." Intereconomics 32 (March/April): 87-92.
Bentley, Duncan. 2003. "International Constraints on National Tax Policy." Tax Notes International 24 (June 16): 1127-44.
Bernstein, Jack. 2000. "Canadian Taxation Issues for Electronic Commerce." Tax Notes International 21 (July 17): 263-71.
Bird, Richard M. 2002. "The Tax Kaleidoscope: Perspectives on Tax Reform in Canada." Canadian Tax Journal 18 (5): 444-78. Reprinted 2002 in vol. 50: 668-92.
Bird, Richard M.1994. Where Do We Go from Here? Alternatives to the GST Toronto: KPMG Centre for Government. Bird, Richard M., and Donald J.S. Brean. 1986. "The Interjurisdictional Allocation of Income and the Unitary Tax Debate." Canadian Tax Journal 34 (6): 1377-1418.
Bird, Richard M., and Pierre-Pascal Gendron. 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?" International Tax and Public Finance 5 (3): 429-42.
Bird, Richard M., and Pierre-Pascal Gendron. "CIVAT, VIVAT, and Dual VAT: Vertical 'Sharing' and Interstate Trade." International Tax and Public Finance 7 (6): 753-61.
Bird, Richard M., and Kenneth J. McKenzie (2001) "Taxing Business: A Provincial Affair?" C.D. Howe Institute Commentary 154. Toronto: C.D. Howe Institute.
Bird, Richard M., and Jack M. Mintz. 2000. "Tax Assignment in Canada: A Modest Proposal." In Harvey Lazar, ed., The State of the Federation, 2000-01: Towards a New Mission Statement. Montreal; Kingston, Ont.: McGill-Queen's University Press.
Bird, Richard M., and Jack M. Mintz. 2003. "Sharing the International Tax Base in a Changing World." In S. Cnossen and H.-W. Sinn, eds., Public Finance and Public Policy in the New Century. Cambridge, MA: MIT Press.
Bird, Richard M., and Francois Vaillancourt. 2001. "The Role of Intergovernmental Fiscal Relations in Maintaining an Effective State in Canada." In Richard M. Bird and Thomas Stauffer, eds., Intergovernmental Fiscal Relations in Fragmented Societies. Etudes et colloques 33, Institut du Federalisme, Fribourg. Basle: Helbing & Lichtenhahn.
Bird, Richard M., and J. Scott Wilkie. 2000. "Source-vs. Residence-Based Taxation in the European Union: The Wrong Question?" In S. Cnossen, ed., Taxing Capital Income in the European Union. Oxford: Oxford University Press.
Bird, G. and R. Rajan. "Time to Reconsider the Tobin Tax Proposal?". New Economy 6 (1999): 229-33.
Bird, R. and D. Chen. "The Fiscal Framework for Business in Asia". In Fiscal Framework and Financial System in East Asia: How much Do They Matter, edited by W. Dobson, pp. 21-89. Toronto: University of Toronto Press, 1998.
Bruce, Donald, and William F. Fox. 2000. "E-commerce in the Context of Declining State Sales Tax Bases." National Tax Journal 53 (4): 373-88.
Canada. 1998a. Minister's Advisory Committee on Electronic Commerce. Electronic Commerce and Canada's Tax Administration. A Report to the Minister of National Revenue. Ottawa. April.
--. 1998b. Minister of National Revenue. Electronic Commerce and Canada's Tax Administration. A Response to the Minister's Advisory Committee's Report on Electronic Commerce. Ottawa. September.
--. 2001. Canada Customs and Revenue Agency. GST/HST and Electronic Commerce. Discussion Paper. Ottawa. November.
--. 2002. "GST/HST and Electronic Commerce." GST/HST Technical Information Bulletin B-090. July. Catts, Timothy. 2003. "Sponsors Call for Permanent Extension of U.S. Internet Tax Moratorium." Tax Notes International 30 (April 7): 39.
Clay Karen. and Robert P. Strauss. 2001. "Trust, Risk and the Growth of E-Commerce: Nineteenth Century Lessons for the Twenty-first Century." in James
Chen, S., J. Martinez-Vazquez, and S. Wallace. "Foreign Direct Investment and Tax Competition in Southeast Asia". Mimeographed. 1997.
Doernberg, Richard L., et al. 2001. Electronic Commerce and Multijurisdictional Taxation. London: Kluwer Law International.
Geist, Michael. 2001. "E-borders loom, for better or worse." Globe and Mail (Toronto), June 28, p. B15.
--. 2002. "E-commerce tax policy penalizes Canadian business." Globe and Mail (Toronto), September 5, p. B9.
Giles, David E.A., and Lindsay M. Tedds. 2002. Taxes and the Canadian Underground Economy. Canadian Tax Paper 106. Toronto: Canadian Tax Foundation.
Goolsbee, Austan. 2000. "In a World without Borders: The Impact of Taxes on Electronic Commerce." Quarterly Journal of Economics 115 (May): 561-76.
--. 2001. "The Implications of Electronic Commerce for Fiscal Policy (and Vice Versa)." Journal of Economic Perspectives 15 (1): 13-23.
Harris, D., R. Morck, J. Slemrod, and B. Yeung. "Income Shifting in U.S. Multinational Corporations". In Studies in International Taxation, edited by A. Giovannini, R. Hubbard, and J. Slemrod. Chicago: University of Chicago Press, 1993.
Heller, P. and Symansky, S. "Implications for Savings of Aging in the Asian `Tigers'". IMF Working Paper No. 97l 136. International Monetary Fund, 1997.
Hufbauer, G. "Tax Policy in a Global Economy: Issues Facing Europe and the United States". Mimeographed. February 2000.
Keen, Michael, and Stephen Smith. 1996. "The Future of Value-Added Tax in the European Union." Economic Policy 23 (): 375-411, 419-20.
--. 2000. "Viva VIVAT!" International Tax and Public Finance 7 (6): 741-52.
Li, Jinyan. 1999. "Rethinking Canada's Source Rules in the Age of Electronic Commerce: Part 1." Canadian Tax Journal 47 (5): 1077-1125.
Li, Jinyan. 2002. "Consumption Taxation of Electronic Commerce: Problems, Policy Implications, and Proposals for Reform." Paper presented to the 32nd Annual Workshop on Commercial and Consumer Law, Toronto, October.
Li, Jinyan. 2003. International Taxation in the Age of Electronic Commerce: A Comparative Study. Toronto: Canadian Tax Foundation.
McLure, Jr., Charles E. "The Taxation of Electronic Commerce: Background and Proposal." In Public Policy and the Internet: Privacy, Taxes and Contracts, edited by Nicholas Imparato, 49-113. Stanford: Hoover Institution Press, 2000.
M. Saunders, P. Lewis & A. Thornhill Research Methods for Business Students Pearson Education 2003 Edition
OECD (Organisation for Economic Co-operation and Development). 2002. Measuring the information Economy. Paris: OECD.
Organisation for Economic Co-operation and Development (OECD). Electronic Commerce: The Challenges to Tax Authorities and Taxpayers. Pads: OECD, 1997.
Rath, T. "The E-commerce Boom: Cash is Stampeding into Internet Stocks, Again". CBS Market Watch, 23 June 1998.
Repss, Agris. 2000. "Electronic Commerce and Tax--Where Is Latvia Now?" Tax Notes International 21 (October 23): 1855-56.
Sanusian, Silvia. 2000. "Taxation and E-Commerce: Preliminary Notes on the Notion of 'Permanent Establishment' from an Argentine Perspective." Tax Notes International 21 (October 23): 1845-52.
Smith, Ernest H. 1998. Federal-Provincial Tax Sharing and Centralized Tax Collection in Canada. Toronto: Canadian Tax Foundation.
Statistics Canada. 2003. "Electronic Commerce and Technology." The Daily, April 2. Ottawa.
Strauss, Robert P. 2000. "State Taxation of Internet Activities: What Role for the Federal Government?" H. John Heinz III School of Public Policy and Management working paper. Pittsburgh: Carnegie Mellon University. April.
Tanzi, V. Taxation in an Integrating WorM. Washington, D.C.: The Brookings Institution, 1995.
Tanzi, V. "Globalization, Tax Competition and Future of the Tax Systems". IMF Working Paper No. 96/141. International Monetary Fund, 1996.
Tanzi, V. "The Impact of Economic Globalization on Taxation". International Bureau of Fiscal Documentation Bulletin, August/September 1998, pp. 338-43.
Tanzi, V. and P. Shome. "The Role of Taxation in the Development of East Asian Countries". In The Political Economy of Tax Reform, edited by T. Ito and A. Krueger. Chicago: University of Chicago Press, 1992.
Vincze, Jim, and Randy Schwartz. 2000. "Canada Keeps Apace with E-Commerce Taxation." Tax Notes International 21 (August 14): 767-73.
Vording, Henk. 1997. "Taxation in an Internet Economy: The Choice between Effectiveness and Individual Privacy." Paper presented to the International Institute of Public Finance, Kyoto, August.