VAT and electronic commerce: the new rules as a means for simplification, combatting fraud and creating a more level playing field?

Abstract

Removing obstacles to e-commerce in the Single Market and ensuring effective taxation in the context of the digital economy has been high on the political agenda both in the European Union and beyond. Recently the VAT rules on crossborder e-commerce have gone through a thorough modernisation with a package of new provisions in the EU VAT legislation coming into effect as of 2019 and 2021. Further measures with the objective of laying down solid foundations for an effective, fair, simple and fraud-resistant taxation of e-commerce transactions have been envisaged. This article helps to navigate a complex set of new provisions and offers reflections on whether the new rules will achieve their objective.

The Evolving ‘Thunder’

“…Haslehner et al argue that the mere consumption of a good or service in a country should not, by itself, entitle that country to tax the profits of the business providing those goods or services [21]. However, for many digital businesses that operate in markets through an online platform, the users of the platform (which may or may not be identical to a business's consumers) play a more integral role in the pursuit of revenue and create material value for a business through their sustained engagement and active participation [45]. Take, for example, a social media platform that generates revenue through directing adverts at Kenyan users who use a free online platform.…”

“…While these challenges are going to be addressed at the OECD level, Hearson points out that African governments have taken the initiative to impose local digital taxes in the form of charging an excise duty on digital transactions, collecting VAT from foreign digital service providers and introducing equalization levies that target the profits made by foreign digital businesses [22]. Papis-Almansa has demonstrated the difficulties in collecting these forms of taxes since they are dependent on international and intergovernmental cooperation [45]. It seems that Africa is not in a position to properly leverage on the collection of the digital tax except by increasing the tax burden on the consumer.…”

“…New streams of revenue generation resulting from online or digital economic activities remains untapped and unapplied towards steering economic growth. Even though these new digital models have been met with novel regulatory and tax approaches globally, they are proving problematic in terms of identifying the activity upon which taxation should be based [43]- [45], [55]. This is because traditional tax rules do not contemplate digital aspects as sources of taxable income.…”

Benefits of Goods and Services Tax implementation in India: An analytical hierarchy process approach

“…GST has removed ambiguity related to tax treatment of e‐commerce operators. The need of effective tax treatment for e‐commerce operators is the biggest agenda for various policymakers (Papis‐almansa, 2019). Under GST system, the e‐commerce operators have been given a defined treatment and the definition of e‐commerce operators and aggregators have also been clarified.…”

The Idea of Common Prosperity and the Path of Poverty Alleviation and Development in the Era of Information Intelligence and Digital Economy

“…This is confirmed in accordance with the practice of developed and developing countries. Developed countries have basically achieved spatial equality in economic development [15]. In most developing countries or regions, due to the unequal economic growth between regions and the different opportunities for regional competition, the country's economic growth is divided into two polar spaces, forming a dual regional structure.…”