E-commerce and taxation: A virtual reality

Observer: Why is taxing e-commerce such a controversial issue?

Simon Woodside: Everyone likes to argue about tax. And the tax treatment of e-commerce is no exception. Some of the controversy stems from such notions as the idea that e-commerce is somehow so special that governments shouldn't tax it at all. That's not an argument that I buy - there's no rational case for granting e-commerce more favourable tax treatment than conventional trade. That would only distort the market and if, as expected, e-commerce continues to grow, it could lead to an expanding hole in the revenue base. E-commerce gets more of the headlines, probably because it's recognised as such an important new feature of the global economy It does beg fundamental questions about the way our taxation systems work - whether it's taxation of company profits or taxation of private consumption. The technology that makes e-commerce what it is puts more of a spotlight on the possible challenges to effective taxation -just how do you tax a cyber-business, or all those sales over the Net? E-commerce makes international trade in particular so much easier, and so the debate about taxation moves up the international level, too. That's where the OECD fits in.