Guide to Web Taxation

Caslon's online guides taxation

If you want expert tax advice we strongly recommend that you consult good accountants and lawyers. You may also wish to examine some of the documents on sites identified below. We will be adding to this guide in coming weeks, to provide a comprehensive resource for exploring issues and developments in Australia and overseas. Why not contact us to discuss access to Caslon's extensive research and assistance in developing strategies to make the most of opportunities online.

digital dilemmas - what, where and how to tax - a snapshot of recent developments
the Byte tax - taxing data, not transactions
taxing the Web in Australia and globally - initiatives in GST-land
and globally - overseas developments
legal frameworks - Australian and other legislation, reports and industry studies about online payments, contracts and other matters

Our Money guide provides pointers to electronic banking, payment systems and digital cash.

digital dilemmas

Astute US lawyer Lawrence Lessig, in Code and Other Laws of Cyberspace (New York, Basic Books 99), writes about libertarian forecasts of the withering of the state: "no government could survive without the Internet's riches, yet no government could control what went on there" and the everywhere-but-nowhere Web undermines traditional revenue collection mechanisms. As a recent article in the Economist pointed out, "buy a novel from your local Manhattan bookstore and you will pay a combined state and city sales tax of 8.25%. Purchase the same book over the Internet from Amazon and there will be no tax to pay."

Two bodies exploring Internet taxation and other issues are the US Advisory Commission on E-Commerce - a new government agency - and the OECD's Taxation & Fiscal Affairs Section, which is monitoring developments at a national and international level.

The Advisory Commission was established under the 1998 Internet Tax Freedom Act and so far has served largely as a sounding board for the concerns of different interests. A useful overview of US developments is provided in the online briefing by the bipartisan Congressional Internet Caucus.

The OECD has recently released its progress report on the development of a global e-commerce tax framework, including treatment of consumption taxes, payment for digitised products (eg music and software delivered online) and tax jurisdictions.

the byte tax

In the US the federal Advisory Commission on Electronic Commerce (ACEC) has been holding hearings on Internet-related tax proposals. Don't hold your breath for coherent, practical outcomes. The most recent major round of consultations, in March this year, mainly demonstrated disagreement within the federal government, between individual states and within business groups.

Bricks-&-mortar retailers, including the International Council of Shopping Centers and International Mass Retail Association, have formed the E-Fairness Coalition, a lobby group advocating a 'level playing field' at the state and national levels. The Internet Tax Fairness Coalition (ITFC) is another lobby group.

The 1998 Ottawa OECD conference on ecommerce resulted in government endorsement of the Electronic Commerce: Taxation Framework report which argued that existing taxation principles should apply to ecommerce (eg no 'byte taxes'), there should be no discriminatory taxation, consistent standards for cross-border taxation should be developed, consumption taxes should be imposed at the place of consumption, and digitised products should not be regarded as goods for consumption tax purposes.

taxing the Web in Australia

In Australia you may wish to explore two sites -

Australian Taxation Office (ATO) - apart from being people who hoover up your money, they have one of the best Australian government sites on the Web

Australian Customs Service (ACS) - cute sniffer dogs but still operating with a pre-digital mindset

Three useful sites for information on the new Goods & Services Tax are:

the Australian Treasury Department site provides a range of information sheets and briefing documents about the joy of tax. An essential if you're a macroeconomist, a policy wonk or just like to wallow in PDFs

more practical, or merely more responsive because they deal with the public on a daily basis, the Australian Taxation Office site features a wealth of information about the GST (admittedly not all of which we understand)

ACOSS's online contribution to tax reform debate features analysis by churches and the Australian Council of Social Services (ACOSS)

and globally

Jonathan Ricci's 1999 Richmond Journal of Law & Technology paper on the IRS versus International Cyberspace Transactions is a useful introduction to legal and technological challenges.

The US Treasury Department's November 1996 paper on Selected Tax Policy Implications of Global Electronic Commerce remains of value.

legal frameworks

The Electronic Transactions Act 1999 is perhaps the major achievement of the national government's 'strategic framework for the information economy' under the coordination of the National Office for the Information Economy (NOIE). The Attorney-General's Department has an e-Commerce Homepage, primarily concerned with the Electronic Transactions Act.

The Act reflects the Electronic Commerce Expert Group's 1998 Electronic Commerce: Building The Legal Framework report, which embraced electronic signatures, recordkeeping, contracts, the UNCITRAL model code for ecommerce, and other matters.

In Europe the European Commission late last year published a proposal for a Directive to "establish a coherent legal framework for electronic commerce across the EU".

Information about the United Nations Commission on International Trade Law (UNCITRAL) is available on that body's website. For a perspective on the negotiating process, the players and likely outcomes we recommend the excellent Global Business Regulation (Cambridge, Cambridge University Press 00) by John Braithwaite and Peter Drahos.