On The Legal Problems Of Transnational Enterprises' Taxation In E - Commerce

In regard of taxation on international commerce, the general practices are adopted that the countries in which corporation, company and individual as their residents will levy an income tax on their revenues generated from abroad while the countries in which the actual commercial activities took place charge tax either in forms of value-added tax (VAT) or sales tax, or both. E-commerce, given its borderless nature, posts many challenges, such as establishment of residence, principle of permanent establishment, and the recognition of revenue in international commerce. Since the very beginning, taxation over E-commerce has been a heated discussion among international community. This dissertation will illustrate opinions from both supporter and non-supporter over the taxation debate. As E-commerce growth continue to expand at its explosive pace, it will be a matter of time before countries, and their governments must address the taxation requirements. Inevitably, each country will also have its own interpretation over jurisdiction and rules. This dissertation is going to discuss experiences from USA, EU (European Union) and China in great length.The international community has put in place many bilateral and multilateral trade agreements in an effort to eliminate double taxation; whether it is due to ambiguity of established residence or definition of revenue source, the agreements ensure each country get its fair share and protect its residence from over taxation. Unfortunately, loop holes in these agreements also became tools for tax avoidance to few. With E-commerce becoming a bigger part of the international trade, countries must play catch up in refining their laws and regulations to deal with double taxation and tax avoidance, which have significant implications on the healthy growth of E-commerce.Of the many taxation strategies proposed,"keeping current system, making modification to accommodate E-commerce" is the most practical. In plain text, the strategy asks for expansion in the definition of permanent establishments, adjustment in recognition of establishment of residence, and reclassification of income based on source and application. Taxation on international E-commerce need to follow the same principles in practice since the days of Adam Smith:Neutrality, Efficiency, Simplicity and Predictability. In China, international E-Commerce is still an unregulated territory. The lack of clear taxation policy is having profound ramification on the Internet industry and economic growth. As a developing nation, China must accelerate its studies on the various problems facing today’s E-commerce, in order to strategize solutions that will to establish a fair, competitive and healthy E-commerce platform of tomorrow.