Companies engaged in electronic commerce have been lulled into a false sense of security over taxation, according to accounts Coopers and Lybrand.
Corporate tax principal Susan Mainwaring said the US government is trying to work out methods of taxing Internet commerce and it was only a matter of time before the UK government tried something similar.
?The sheer volume of business now conducted over the Internet means that governments cannot afford to ignore these issues if they want to protect their share of international tax revenues,? Mainwaring said.
She said there were basic taxing concepts in most developed countries, which were applied in conjunction with a system of tax treaties. These concepts relate to the place where contracts are made and profits earned, and determine which territories can levy tax. Internet trading did not fall into the categories that had been set by these rules or by years of litigation history.
Mainwaring said that some US states were already looking at taxing Internet service providers. ?In the absence of an international convention on electronic commerce taxation it would be possible to be taxed several times for the same transaction,? Mainwaring said.
She urged UK companies interested in electronic commerce to become involved with the taxation debate to insure a fair and reasonable set of international rules was agreed.
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