Article, Major domestic and international compliance issues posed by electronic commerce

Global E-commerce Taxation

Benjamin M Musau, Lawyer, Nairobi, Kenya

This article discusses the major compliance issues posed by electronic commerce including both domestic and global issues.
The major compliance issues posed by e-commerce are:

• Identification of the country or countries which have the jurisdiction to tax income derived from e-commerce.
• Determining whether residence-based taxation is allowed in the current tax system.
• Classifying income arising from transactions in digitized information.
• Distinguishing between income arising from royalty, sale of goods, and services.
• The analogous nature of e-money with cash, and the potential for anonymous and untraceable transactions.
• Identifying the online purchaser and the seller without violating these parties’ privacy privilege.
• Lack of adequate guidance on the actual taxation of e-commerce transactions.  In my country, Kenya, for example, there is no legislation at all, and no publicly available guidelines on e-commerce taxation.
• The impact of advancing technology on record-keeping and retention regulations.
• Storage and maintenance of sales transactions from the purchaser and seller perspective.
• Reliability of internal controls.
• Lack of uniformity and absence of e-commerce taxation laws.

References:

1. Selected Tax Policy Implications of Global Electronic Commerce.  Department of the Treasury, Office of Tax Policy, November 1996.  http://www.treasury.gov/resource-center/tax-policy/Documents/internet.pdf.  Retrieved April 26, 2011.
2. Electronic commerce: A Report of the Steering Committee (2006).  Federation of Tax Administrators.  http://www.taxadmin.org/fta/pub/ecommerce.pdf.  Retrieved April 26, 2011.

Benjamin M Musau
April 26, 2011

• Integrity and security
• Enforcement
• Control of Internet indecency versus free speech (indecency, children and legislation)
• Internet issues involving spamming or spam mail.  Spamming involves sending e-mail messages indiscriminately and without the permission of the receiver and disregarding the appropriateness of the message.  This affects the speed of the Internet, and may bring the Internet down completely.

All these challenges have legal implication on world economies and need constant and proactive legislation and monitoring.

Dr. Benjamin Musau

I am a Kenyan Advocate and the Managing Partner of B M Musau & Co., Advocates, a position I have held since 1999. My work encompasses regulatory reforms, reduction of administrative burdens, the structure of business entities, joint ventures, acquisitions, banking, foreign investment and other general corporate areas