Article, Major Taxation Issues of Offshore E-Commerce

Global E-commerce Taxation

Benjamin M Musau, Lawyer, Nairobi, Kenya

This article discusses the major taxation issues of Offshore E-Commerce. What are the pros and cons of offshore taxation of E-Commerce?
The major taxation issues of Offshore E-Commerce are:
 

• The threat of tax leakage through commercial transactions which occur through the Internet.
• E-commerce appears to jeopardize the traditional conceptualization of the existing structures of income corporation tax and value added tax including sales tax.
• Countries attempting to draw limits on the activities of offshore jurisdictions because of governments’ fear on the apparently fast growth of offshore e-commerce.
• There is no worldwide legislation to cover world wide commerce over the Internet and meanwhile e-commerce takes place based on the traditional taxation law as it stands.  Most of the concepts and terms used in the existing tax law such as “source of supply” and “permanent establishment” are not that clear when used in the context of offshore e-commerce.
• The U.S. has imposed a moratorium through the Internet Tax Freedom Act while the EU has declined to impose a moratorium on e-commerce taxation.

 
Pros of offshore taxation of e-commerce are:
 

• Increased revenues to governments as Internet sales volumes increase.
• The revenues will finance social service delivery.

 
The cons of offshore taxation of e-commerce are:
 

• Unhaphazard application of traditional tax laws will negatively impact on the Internet and this might negatively hamper the growth and development of e-commerce, thereby negatively affecting the creation of much needed job opportunities.
• It is necessary to develop cyberspace laws for the taxation of e-commerce that will not negatively affect the growth and development of e-commerce.

 
 
References:
 
http://www.offshore-e-com.com/html/ecomexec.html  Retrieved from the Internet on May 25, 2011.
 
 
Benjamin M Musau
 
May 18, 2011

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