KEY REASONS THAT E-COMMERCE RAISES TAX ISSUES

E-Commerce creates new challenges to the tax systems. One of the challenges derives from the fact that a business can engage in e-commerce without having a physical presence; and therefore, they may escape fiscal scrutiny. This is way beyond what was imagined during the formative states of present tax laws. Other tax concerns created by e-commerce are the possibility of e-commerce facilitating tax avoidance and lose of revenue for local authorities. For instance, e-commerce can generate opportunities for legitimate tax planning so that businesses can reduce their tax payments in some, most or all the countries in which they operate; consequentially, this creates lose of revenue for local governments. Additionally, e-commerce may also provide an opportunity for offshore transactions to generate unreported income for U.S. citizens. Additional example of the tax issues raised by e-commerce is the possibility that businesses face risks in the tax treatment of their methods and structures.

The following questions have been addressed in this article:

Who would ultimately absorb the cost of the information gathering - the provider or the consumer?
What is the proper way to tax e-commerce transactions?
Are governments prepared to expend the necessary resources to oversee and enforce provider compliance under the plan? Do governments have incentive to do so?

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