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Governing The Taxation Of Digitized Trade


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    The paper highlights the challenges for international taxation due to digitized trade. Digitization makes it easy to penetrate foreign markets without the need for physical presence in the buyer’s country. This phenomenon has generated debates on the salience of source versus residence-based taxation, the definition of permanent establishment, and, the administration of consumption taxes. The WTO has not been able to engage effectively in this area. The paper notes both the inadequacy of unilateral approaches and the need for an international organization for setting and monitoring global standards. It commends the vitality of source-based principles and the traditional conception of permanent establishment. It pleads for increased international cooperation for administering consumption taxes. Digitized trade without globally acceptable standards is likely to lead to double taxation or tax evasion or both.

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    Paper provided by The Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number 2002-05.

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    Length: 39
    Date of creation: 09 Sep 2002
    Date of revision:
    Handle: RePEc:pas:asarcc:2002-05

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    Keywords: Electronic commerce; service trade; taxation; international cooperation;


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    1. Houghton, Kendall L. & Cornia, Gary C., 2000. "The National Tax Association's Project on Electronic Commerce and Telecommunication Taxes," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1351-72, December.
    2. McLure, Charles E. Jr., 2000. "Implementing State Corporate Income Taxes in the Digital Age," National Tax Journal, National Tax Association, vol. 53(n.4), pages 1287-1305, December.
    3. Arvind Panagariya, 2003. "ECommerce WTO and developing countries," International Trade 0309001, EconWPA.
    4. Yannis Bakos, 2001. "The Emerging Landscape for Retail E-Commerce," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 69-80, Winter.
    5. David Lucking-Reiley & Daniel F. Spulber, 2000. "Business-to-Business Electronic Commerce," Vanderbilt University Department of Economics Working Papers 0016, Vanderbilt University Department of Economics.
    6. Charles McLure, 1999. "Electronic Commerce and the State Retail Sales Tax: A Challenge to American Federalism," International Tax and Public Finance, Springer, vol. 6(2), pages 193-224, May.
    7. Stephen J Kobrin, 2001. "Territoriality and the Governance of Cyberspace," Journal of International Business Studies, Palgrave Macmillan, vol. 32(4), pages 687-704, December.
    8. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
    9. Catherine L. Mann & Sue E. Eckert, 2000. "Global Electronic Commerce: A Policy Primer," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 318.
    10. Rosendorff, B. Peter & Milner, Helen V., 2001. "The Optimal Design of International Trade Institutions: Uncertainty and Escape," International Organization, Cambridge University Press, vol. 55(04), pages 829-857, September.
    11. Aaditya Mattoo & Rosa Perez-Esteve & Ludger Schuknecht, 2001. "Electronic Commerce, Trade and Tariff Revenue: A Quantitative Assessment," The World Economy, Wiley Blackwell, vol. 24(7), pages 955-970, 07.
    12. Dale W. Jorgenson, 2001. "Information Technology and the U. S. Economy," Harvard Institute of Economic Research Working Papers 1911, Harvard - Institute of Economic Research.
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