UK Welcomes OECD Recommendations On E-Commerce Taxation

Amanda Banks, Tax-news.com, London

14 February 2001

The OECD has announced it will release its conclusions and recommendations on the taxation of electronic commerce next month. As part of its continuing work on the taxation aspects of electronic commerce, the OECD says that the document will comprise a comprehensive set of reports and technical papers which are based on the Ottawa Taxation Framework Conditions, with guidelines effective for the next two years.

In 1998, taxation issues were a key part of the e-commerce agenda at an OECD Ministerial conference in Ottawa. A series of broad principles applying to the taxation of e-commerce were agreed such as: neutrality, efficiency, certainty and simplicity, effectiveness and fairness, and flexibility.

The publication is the result of a process of international dialogue, research and analysis that has taken place through the OECD's Committee on Fiscal Affairs since the Taxation Framework Conditions were agreed nearly three years ago, on issues such as cross-border direct taxation, consumption tax and tax administration. 'Taken together,' states the OECD, 'these reports represent a major step forward toward reaching an international consensus on the taxation treatment of e-commerce.'

UK Paymaster General, Dawn Primarolo, welcomed the set of reports saying: 'Electronic commerce will be one of the main driving forces for the UK economy in the years ahead and it is important that taxation is not a barrier to its growth. In the UK we're determined to provide an environment in which e-commerce flourishes.'

She continued: 'This is a global issue and no one country can afford to "go it alone". It is important for countries to work together and the efforts of the OECD are to be welcomed, especially the way business has been involved in the work. I am particularly grateful that the UK has been able to provide a lot of input into these final reports.'

The UK government has pledged to make the UK a world leader in which to trade electronically by 2002. It has also set itself the target of making available electronically all government services by 2005. The government has also confirmed that it agrees with all the recommendations and conclusions but with one exception - in a press release issued this week, the government stated that it: 'stands by its point of view that in no circumstances do servers, of themselves or together with web sites, constitute permanent establishments of e-tailers. This view will provide certainty on a complex issue on which business has been consulted and fully supports.'

Gabriel Makhlouf, Chair of the OECD's Committee on Fiscal Affairs as well as the Inland Revenue's International Director, added: 'This marks an important step for the international taxation of electronic commerce. Ensuring a robust and understandable taxation regime will reap benefits for both business and governments.'

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