E-Commerce and the effects of technology on taxation Could VAT be the eTax solution

Contents:
1 A Bird’s Eye View 1.1 Key Tax Principles: Source, Residence, Physical Presence 1.2 The Scope of This
Paper 1.3 Conclusion Bibliography Part I History of Taxation and Development of Globalisation
2 History of Tax 2.1 Introduction. 22 2.2 History of Taxation, Globalisation and International Trade ........ 22 2.
3 The Rise of VAT 2.4 Globalisation – Its Impact. Bibliography 3 The OECD and the EU 3.1 OECD and Its Development 3.2 The European Union . Bibliography Part II Internet, Ecommerce, Servers and ISPS
4 ARPANET 4.1 Introduction 4.2 History of the Internet Bibliography
5 Development of Technology 5.1 Websites, Servers, IPSs & Technological Solutions 5.2 Technical & Illustrative Examination of Load Balancing . Bibliography xvii xviii Contents
6 Mega Cyber Corporations 6.1 Amazon.com 6.1.1 Microsoft 6.1.2 Google. 6.1.3 eBay 6.1.4 PayPal . 6.1.5 iTunes 6.1.6 Second Life 6.1.7 Amazon.com Bibliography
7 Unbounded Technology . 61 7.1 Future Technological Advancements 62 7.2 eCommerce 7.3 Electronic Transactions Law 7.3.1 Functional Equivalence Approach 7.3.2 Privacy Bibliography
8 Is the Virtual World Real? 8.1 The Virtual World Versus The Physical World 8.2 Conclusion Bibliography
Part III Defining ‘Residence’ for Taxation Purposes
9 What Does ‘Residence’ Mean? 9.1 Introduction 9.2 Traditional Definition and Approach to ‘Residence’ 9.2.1 Individuals 9.2.2 Persons Other Than a Natural Person. Bibliography
10 Is ‘Residence’ in the Virtual World Possible 10.1 Applying Virtual World Attributes to the Traditional ‘Residence’ Definition 10.2 ‘Residence’ Within the Virtual World Bibliography Part IV Defining ‘Source’ for Taxation Purposes
11 The Meaning of ‘Source’.109 11.1 Introduction 109 Bibliography 113 Contents xix
12 The Traditional Concept of ‘Source’ .115 12.1 Traditional Definition of ‘Source’ 115 12.2 Permanent Establishment 121 Bibliography 128
13 Defining ‘Source’ Within an eCommerce Context 131 Bibliography 135
14 Conclusion ... 137 Bibliography .139 Part V Value Added Taxation
15 Introduction 143 Bibliography 147
16 Development of VAT and Adoption of VAT in Various Countries & Multistage Tax Methods 149 16.1 Development of VAT and Adoption of VAT in Various Countries 149 16.2 Multistage Tax Methods 152 16.2.1 Basic Principles and Definitions 152 16.2.2 Addition Method 153 16.2.3 Sales-Subtraction Method 153 16.2.4 Credit-Subtraction Method That Does Not Rely on VAT Invoices . 153 16.2.5 Credit-Invoice Method .154 16.2.6 ‘Shared Basic Principles’. 154 16.2.7 VAT Rates. 156 Bibliography 158
17 eCommerce Transactions: OECD Commentary 161 Bibliography 167 18 Jurisdictional Analysis 169 18.1 Europe 170 18.1.1 European Union VAT Law 171
18.1.2 The United Kingdom 188 18.1.3 Sweden 194 18.1.4 Other European Countries195 18.2 Southern Hemisphere . 199 18.2.1 New Zealand 200 18.2.2 South Africa 205 18.2.3 Australia. 208 18.2.4 Brazil 213 xx Contents 18.3 Asia 213 18.3.1 China . 214 18.3.2 Japan . 215 18.4 Canada 215 18.4.1 Various Indirect Taxes Imposed in Canada 217 18.4.2 ‘Destination’ or ‘Origin’ Principle. 218 18.4.3 GST/HST and Place of Supply Rules 219 18.4.4 eCommerce in Canada 222 Bibliography 230
19 VAT Jurisdictions vs. Non-VAT Jurisdictions 235 Bibliography .. 237
20 United States of America 239 20.1 Introduction. 240 20.2 The Indirect Tax System Employed in the United States of America. 240 20.2.1 Streamlined Sales Tax Program. 242 20.2.2 USA and Internet ales 244 20.2.3 Solution to Inter-state Internet Transactions Implemented by the State of New York 244 20.2.4 State of New York . 247 20.2.5 State of Iowa 251 20.2.6 State of Alabama 252 Bibliography 253
21 The Impact of Technology on Taxation & VAT in the Virtual World 257 21.1 Introduction 258 21.2 The Impact of Technology 259 21.3 Applying VAT to the Virtual World 262 21.3.1 Amazon.com 265 21.3.2 Second Life 266 21.3.3 Is VAT Perfect in Its Current Form? 270 21.4 VAT as an Effective eTax 274 21.5 Collection and Monitoring 277 Bibliography 280 Part VI Practical Examples 22 Case Study: Google AdWords.285 22.1 Background Facts 285 22.2 Income Tax Implications of Residence and Source. 288
22.3 Efficacy of Applying Income Tax ‘Residence’ or ‘Source’ Provisions . 291 Contents xxi 22.4 Applying VAT to the Google AdWord Services 291 22.4.1 Application of the EU VAT Directive. 292 22.4.2 Application of the New Zealand GST Legislation 294 22.4.3 Application of the South African VAT Legislation 295 22.5 Effectiveness of Applying VAT Provisions 296 Bibliography 297 23 Case Study: Software Consultant. 299
23.1 Background Facts [Structure A] 299 23.2 Applying VAT to the Cross-Border Electronic Consulting Fee 300 23.2.1 Traditional Application of SA VAT in Cross-Border Transactions 301 23.2.2 Alternative Application of VAT in Cross-Border Transactions Occurring in an eCommerce Environment 302 23.2.3 Other Possible South African VAT Implications Which Could Arise. 303 23.2.4 Swedish VAT Implications 303 23.3 Effectiveness of VAT Provisions. 305 23.4 Income Tax Implications 306 23.4.1 Income Tax Implications of Current Circumstances 306 23.5 Income Tax Implications in Terms of a New-Age Business Structure [Structure B] .307 23.5.1 Income Tax Implication of Change in Business Structure 308 23.5.2 VAT Implication of a New-Age Business Structure 310 23.6 Effectiveness of Applying VAT Provisions 316 Bibliography 316 24 Case Study: Server Warehousing 319 24.1 Background Facts. 319
24.1.1 Shared Hosting 322 24.1.2 Dedicated Server. 325 24.1.3 Colocation 325 24.2 VAT/GST Implications Relating to Colocation 326 24.2.1 New Zealand GST Implications 326 24.2.2 South African VAT Implications 326 24.3 VAT/GST Implications Pertaining to Shared Hosting 327 24.3.1 New Zealand GST Implications 327 24.3.2 United Kingdom/EU VAT Implications 24.3.3 South African VAT Implications 24.4 VAT/GST Implications Relating to ‘Dedicated Server’ 24.5 Effectiveness of Applying VAT Provisions Bibliography xxii Contents Part VII Other Taxing Issues Emanating from eCommerce
25 Tax Avoidance and Tax Evasion Bibliography
26 Transfer Pricing Issues and Concerns 26.1 Traditional Definition of Transfer Pricing 26.2 Issues and Concerns in Respect of the Application of Transfer Pricing Principles in an eCommerce Environment 26.3 Impact of Technology on Transfer Pricing Bibliography
27 Enforceability & Administrative Costs vs. Benefits
28 Various Recommended Solutions Bibliography Part VIII Conclusion and Opinion Advocated with Regard to the eTax Solution
29 Is the Allure of VAT Justified 29.1 Review of the Argument Within This Paper Supporting VAT as the eTax Solution 29.2 Conclusion and Opinion Advocated That VAT Is the eTax Solution Index