Politics Information

Adminstration of E-Business Taxation

The entry by telephone and cable companies into the Internet service provider business within the last few years has given new hope to the congestion problem in that they now have a vested interest in investing in infrastructure. The Internet connection and set-up cost are not inexpensive for every business; however, the competitive cost of not having it probably outweighs the financial cost of connectivity. Even if businesses deal with customers that are domestic or local, reaching the customer is only one aspect of the Internet. It can be used to communicate with suppliers to build supply networks, order materials, sales or other information 24 hours a day, 7 days per week.

Selling on World Wide Web Prior to the contract: The customer enters the merchants web site, views the product and company information and if the vendor and the buyer have established a mechanism that neither of them should be able to repudiate the offer price or the products ordered, and If the customer is convinced that the product will arrive at an approximate specified delivery time, and If the vendor is satisfied that it will be paid Then, the customer will place an order. Settlement of the amount due: the vendor invoices, the customer authorizes/pays.

The post sales warranty, support and customer data gathering there is some debate regarding the formation of an electronic contract over the Internet. One of the differences between contracting over the Internet and contracting by any other electronic means is the on-line Internet Service Provider. The issue is whether the parties are communicating and contracting directly or are they communicating and contracting through a third party. Under the acceptance rule a contract will not be formed until acceptance of the offer by the offeree has been communicated to the offeror. The exception to the rule is called the postal rule, where an offeror or has explicitly or implicitly agreed to the offer being accepted by the post office, once the letter or other communication has been posted. The contract is deemed to have been formed even if the offeror does not receive the letter accepting the offer. In building the web site documentation, it should be made clear in the relevant terms and conditions or by a statement that will be seen by the user before sending their request by email to purchase an item,

Administration of Sales Tax and Central Excise duties

One challenge is presented by continued growth in the volume of Internet sales. To what extent that such growth occurs, it increases remote sales where compliance is already most problematic. Another challenge is that the expanding variety of e-commerce transactions and products may create new types of compliance problems, such as identifying the location and nature of a sale. Although the future growth rate of Internet sales is not known, certain characteristics favor the rapid growth of Internet sales. For example, Commerce has reported that e-commerce not only reduces the cost and time of doing business but also provides alternative shopping sites, expands existing markets, and creates new markets. E-commerce also frees some sellers from the "geographic confines and the costs of running actual stores." These characteristics have the potential to increase the number of remote sellers and purchasers as well as increase the volume of remote sales. To the extent that such sales growth occurs, it will magnify the existing sales and central excise duties compliance problems associated with remote sales, such as the difficulty of enforcing compliance by purchasers in the case of remote sales without nexus. The expanding variety of electronic transactions may also create new compliance challenges. Shifts from traditional forms of sales to Internet sales can make it more difficult to identify the location of the buyer and the seller, the status (business, individual, other) of the buyer or seller, and the nature of the product itself.

In terms of the location, both sellers and purchasers may have multiple locations, and the Internet makes it easier for these firms to conduct their transactions from the location that offers the greatest tax advantages. Businesses may also choose to establish a presence in certain jurisdictions in order to maximize these advantages. As a result, determining the location of buyers and the sellers' activities for nexus purposes, which is important for the collection of sales and central excise duties is more difficult in an environment with Internet sales. A related challenge for the collection of sales and central excise is determining the status of the buyer and seller in Internet transactions. The status of the seller, for example, is relevant since certain sales by individuals are not subject to sales and central excise duties. However, the development of new markets, such as Internet auctions, has created a new opportunity for businesses as well as individuals to avoid sales and central excise duties. To the extent that businesses are using these new markets to make sales, it would be necessary for tax authorities to be able to identify those sellers as businesses rather than as individuals in order to assess the appropriate taxes. Need for legislation The Internet, as we know it today, is no longer a medium limited to nerds and geeks in science labs. It has become a whole new way of life. We have started identifying ourselves with this medium to such an extent that nowadays we take a net connection for granted.

Electronic mail, surfing the World Wide Web, browsing through search engines for that elusive piece of info have all nowadays been woven into the fabric of daily life. In face of this media juggernaut, little do we realize how close we are to being robbed of our credit card numbers by that smart programmer down the road, or that we might be under surveillance with some body stalking our movements on the net or simply still, some body gaining unauthorized access to all the private information on our computers wrecking havoc in our private lives. The era of the Net Economy has also bought with it new approaches to success in business. The Internet and the Web are creating a new economic order-one where people and businesses can exchange information, goods, and services at the speed of light. Many smart companies are rapidly gaining competitive advantage by leveraging the business benefits of these web-based connections, and succeeding in new economic relationships. Today businesses large and small face an unprecedented set of challenges-and an unparalleled set of opportunities. They are interconnecting their customers and business partners with their core business processes. However they are vulnerable. This vulnerability comes from knowledge that they transact in an insecure environment, an environment bereft of legislation. They too face as much uncertainty about a hacker attack on their corporate databases as the common man does. Depending upon their parent country, companies doing business on the Internet have to face varying degrees of ambiguity regarding the laws that not only constraint but also protect them. Global computer-based communications are cutting across territorial borders, creating a new realm of human activity and undermining the feasibility--and legitimacy-of applying laws based on geographic boundaries.

While these electronic communications play havoc with geographic boundaries, a new boundary, made up of the screens and passwords that separate the virtual world from the "real world" of atoms, emerges. This new boundary defines a distinct Cyberspace that needs and can create new law and legal institutions of its own. Territorially based law-making and law-enforcing authorities find this new environment deeply threatening. But established territorial authorities may yet learn to defer to the self-regulatory efforts of Cyberspace participants who care most deeply about this new digital trade in ideas, information, and services. Separated from doctrine and tied to territorial jurisdictions, new rules will emerge, in a variety of online spaces, to govern a wide range of new phenomena that have no clear parallel in the non-virtual world. Clearly, the shift from a physically oriented commercial environment to a knowledge based electronic environment presents some very serious and substantial issues that must be addressed. Existing regulatory frameworks are likely incapable of adequately taxing electronic transactions, and must be adapted. Otherwise, governments may face a significant decrease in their tax revenues, as more and more commerce takes place over the Internet. The task for government then is to attempt to fit Internet transactions into existing rules of taxation. Where this is impossible, it may be necessary to adapt and amend the rules in order to catch Internet transactions.

Adil Waseem


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