Research On Taxation Problems Under Electronic Commerce

Due to the advance in technology, the traditional tax theories are unable to cope with the rapid development of the E-Commerce in the last few years. As a result the virtual world becomes a tax-free region. In this circumstance, the tax payment has been run off continuously from the real world and hit the traditional economy severely. How to re-engine the traditional tax theories in order to fit the realm of E-Commerce becomes a hot topic recently. Furthermore, it is a challenge to breakthrough the limitation and fully extends the two important traditional tax concepts "Permanent Establishment" and "Tax Jurisdiction" into the virtual world for bringing the E-Commerce taxable. There is no satisfactory solution available for the subject up to now, not only because of the complexity of the problem but also it involves difference interests of each country.The writer begins with producing some prominent opinions on the taxability of E-Commerce including government of major countries, scholars, enterprises and organizations. And then he discusses the problems and obstacles when applying traditional taxation rules in the E-Commerce transactions. By focusing on the income tax, the writer advocates establishing the servers and networks providers as "Permanent Establishment" in the virtual world in order to solve the indetermination of E-Commerce transactions. Furthermore with the use of purchaser control model together with the payment system, the consumption tax taxpayers can be easily identified in the E-Commerce transactions. This helps the related government to ascertain and exercise their right for administrating the collection of tax in the virtual world.In order to create a fair, reasonable and legal environment to bring traditional tax theories into the E-Commerce, the writer further puts forward some suggestion to strengthen the taxability of E-Commerce transactions. For the purpose of fair competition, he expects all forms of commerce shall under the same roof of taxation in the future.