Persistent Problems and Recent Developments

E-commerce on the Internet will create new demands on taxation. In the field of income and business taxation there exists a large potential for profit-shifting into low-tax countries, especially concerning trans-fers of immaterial goods and transfer pricing. In the long run, this can lead to a severe revenue shortfall. Turnover taxation/VAT raise problems if foreign suppliers sell electronic products or services to final consu-mers online. VAT should be charged in the country where the consumption takes place, which is currently not the case. Otherwise, distortions of competition and unjust effects of taxation will become more compre-hensive. This requires special technical solutions and closer international co-operation among taxation au-thorities. As a basic principle, e-commerce should not enjoy tax privileges. Rather, it should compete against the traditional economy on the basis of its specific advantages, which, on the other hand, should not be impeded by undue taxation procedures. 1