Debate on tax looms at e-commerce conference

Trade ministers, taxation officials and private-sector experts were’ Internet tax. meeting in Ottawa this week at an international conference that is likely to shape international tax policies covering electronic commerce.

Technology minister Barbara Roche is leading the UK delegation and will summarise the decisions taken by ministers at the Organisation for Economic Co-operation and Development meeting on e-commerce on Friday.

Customs & Excise and the Inland Revenue said on Tuesday UK e-commerce taxation principles would centre on ‘neutrality, certainty, effectiveness and efficiency’.

Detailed policy discussions were set to take place yesterday, in advance of the ministerial meeting today and tomorrow, and will be aimed at reaching consensus on key definitions such as what constitutes a taxable presence and how tax authorities can collect revenue from goods and services delivered via the Internet.

‘Ottawa may be a watershed for indirect taxation,’ predicted Ernst & Young tax partner Malcolm Penney, who was in Ottawa representing the Chartered Institute of Taxation. ‘The principles will be agreed from which policies can develop.’

Tax experts said the most likely area of agreement will be on proposals that consumption taxes such as VAT should be raised in the country of consumption and that digital products such as software or music delivered electronically should be treated for tax purposes as services rather than goods.

Other discussion topics, such as if a Web server is a ‘permanent establishment’ for tax purposes, proposals for cross-border co-operation between tax authorities and the suggestion that tax authorities collect data on all online transactions, are so controversial that conclusive decisions are unlikely to emerge from the meeting.

‘Ottawa is a flagship – it’s very difficult for 100 people in a conference hall to have a constructive debate,’ said Mike Perkins, senior international tax manager of Deloitte & Touche’s e-commerce group.

Roche’s speech will step up the UK government’s campaign to take the lead internationally on e-commerce.

Last week, trade minister Peter Mandelson announced his intention to make the UK ‘Europe’s digital pathfinder’. He announced the Department of Trade and Industry was conducting a review of its regulatory and business support services to ensure they supported digital commerce.

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