Subject: IOTP and taxation

From: [email-masked]
Date: Wed, 2 Dec 1998 06:21:48 EST

David,

If this does not reach the IOTP list would you please forward it.

I have thought from my first involvement with IOTP that it had great potential
in addressing not just some of the  taxation issues but also other e- commerce
issues, particularly in respect to to legal requirements relating to consumer
transactions. I actually think this should be viewed as a plus not a minus.

The US may have a five year moritorium on the introduction of new forms of
taxation on Internet trade but many countries do not. Equally the moritorium,
in theory, does not relieve the trader from the usual requirements of record
keeping and accounting to the tax authority.  Forget about new forms of
Internet taxation, there is already a vast array of existing forms of taxation
which do apply NOW to e-commerce.

One ought to remember that, notwithstanding a trader may be conducting
business electronically,  most tax authorities have draconian powers of
investigation and enforcement, i.e. which can extend into the electronic
environment.  Most traders will want to carry out their business activities
legitimately, certainly they will want to avoid the unwelcome attentions of
their local tax authority. Potentially, IOTP can help with that, particularly
if it has the  seal of approval from the relevant tax authority.

As a small point, I can't actually see tax authorities being eager to
intervene in transactions as a trusted third party, surely cost alone would be
a deterrent?  Wouldn't providing the information required in the
'Organisation' component be rather an inhibitor in 'consumer' based
transactions ? Equally, tracing the geographic location of the 'tax payer'
purchaser of intangible goods is a well known problem for which currently,
there appears to be no easy answer.

I think that certain things are likely to happen in the not too distant
future:

1.  Tax authorities will start to try to enforce existing forms of taxation on
e- commerce. The result could be painful for everyone involved.

2. Traders will want an 'approved' method of accounting to their tax
authority, in which they can have confidence. The tax authority will want to
see a secure/ tamper evident method of record keeping, probably approved by
them in any event.

3. Traders will also start to realise that they may not only be taxable 'at
home' but also in the countries into which they are selling. 

I think the issues are more complex than as set out in David's e-mail and I do
not think that IOTP can solve them all, but there could be advantages to IOTP
in taking this route which deserve very careful consideration. As I have said
before, I also believe IOTP has unrecognised potential in other legal aspects
of e-commerce, which as yet, have not been addressed.

Jane Hill

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From: Steve Schear <[email-masked]>
Date: Sat, 5 Dec 1998 22:47:59 -0800

>Let's be clear - I don't think anyone *loves* paying taxes. But
if the choice is between paying my taxes or having no e-commerce
at all (because it is being used to avoid taxes), then I'll pay
the taxes.

        "Further, private sector groups aiming at the
        introduction of new technical standards or protocols for
        electronic commerce could co-operate by contacting
        Revenue authorities, e.g. through the OECD, at an early
        stage to enhance a constructive dialogue designed to
        find mutually acceptable solutions."

As has been discussed on this list before, taxation should not be part of
any new on-line trading or transaction protocol any more than it is for
existing on-line transaction systems (e.g., credit cards). Although its
clear many nation states have a strong interest in collecting revenue from
Net transactions there's no compelling reason to explicitly build this in
to the protocols. The argument that unless we do so e-commerce will somehow
be stifled is hollow and amounts to nothing more than the economic
equivalent of fear-driven self-censorship.

There is no such thing as one's 'fair share of taxes'. There is only taxes
which are collectable and those which are not. Like patriotism, the concept
has oft promoted by those who ignore it themselves.

One true promise of the Net is a global not international place. No need to
lift the tent and let the camel (not alone his nose) in.

--Steve

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