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Underlying such a proposal is a motive for geo-political interests. The conservative approach will in practice lead to one effect—further the shifting of the right to tax e-commerce profits from the source state to the residence state. When the flows of capital investments and trade are in balance, the shift does make sense because it only changes the direction of taxation and simplifies the taxation by reducing the source taxation. However, if the flows are in imbalance, the result would be that the residence state unilaterally benefits from such a shift. That exactly explains why e-commerce net exporting countries such as the United States have held so conservative attitude towards taxation of e-commerce.
However, in order to implement the policy goal, that is, to provide a fiscal climate within which electronic commerce can flourish, weighed against the obligation to operate a fair and predictable taxation system that provides the revenue required to meet the legitimate expectations of citizens for publicly provided services.”
, an international consensus shall be above all the most important. As is recognized by OECD in its reports, the consensus is more important than the rule itself. Any solution thus must produce a fair sharing of the tax revenue arising from cross-border e-commerce among concerning states, especially between source States and resident States. From this standpoint, the conservative approach is by no means the proper one to such an effect.
It should be also noted that, Business Profits is now in its working project on examining the application of current treaty notions to e-commerce. It will explore the possibility of considering alternatives to these notions. It still remains to be seen what approach and attitude the Business Profits TAG will possibly take in its future work.
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I have been engaged in the research of international tax issue of Electronic Commerce and Cyber law under the supervision of Prof. Liao since 1998 when I was an undergraduate student. Some of my research papers have been published in established core journals, such as International Taxation, Journal of International Economic Law of China, etc. However, it needs to be mentioned that my article here is not meant to be an in-depth analysis of this issue, but rather an informational summary and comments on the very recent progress made in this field. Any comments and suggestions are very welcome. Please mail to lawbig@vip.sina.com.
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