E-commerce outstripping tax system

The IOD has been examining issues around the taxing of profits from e-commerce and has concluded governments are not keeping up with business and need to develop an international solution to cope with the changes.

Peter Allan, a senior IoD official, said: ‘The problems are international and they demand an international response. That means obtaining a consensus between many different countries.’There is a serious danger that changes in business practice will outstrip developments in the tax system. The world is running away from the authorities.’

Worry at the IoD echoes concerns expressed by tax experts on the European Commission’s failure to deal with collecting VAT on electronic goods sold to EU citizens from third party countries like the US.

Britain has asked for a VAT moratorium on all electronic goods, such as music, until a solution to collecting the tax has been solved.

Allan, the chairman of the IoD in the North East, said physical location of a company has become less important enabling business profits to move offshore.

Richard Baron, deputy head of the IoD’s policy unit, said that bodies like the Organisation for Economic Co-operation and Development had to move quicker to find solutions to the many weighty problems surrounding the taxation of e-commerce.

Companies, especially multinationals, he said, will need to know what the rules will be.

‘The taxation of profits from e-commerce has not yet become a burning issue, because there have been few profits to tax.

‘But there soon will be profits, largely made by multinationals with complicated structures of branches and subsidiaries,’ he added.


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