Section 3: Revenue Based Interests
The main concerns raised by the growth of electronic commerce for the collection of tax revenues are first, whether existing tax policy is sufficiently robust to address any new and existing issues, and secondly, whether such activities pose a threat to the revenue base through avoidance and evasion.
At the October 1998 OECD Ministerial conference A Borderless World - Realising the Potential of Global Electronic Commerce Ministers from the OECD countries endorsed the Taxation Framework Conditions paper prepared by the OECD Committee of Fiscal Affairs. This was incorporated within the Establishment of Ground Rules for the Digital Market Place. The key aspects being:
- Both Revenue Administrators and business affirmed that widely accepted general tax principles should apply to the taxation of electronic commerce;
- That the taxation framework for electronic commerce should be guided by the same taxation principles that guide Governments in relation to conventional commerce;
- Countries should use electronic commerce to develop taxation framework conditions for taxpayer service, tax administration, consumption taxes and international tax norms; and
- Work closely with all the players - business, particularly small and medium enterprises and non-member countries.
This forum, and in particular the paper on the Tax Framework Conditions, confirmed that electronic commerce does raise both tax policy and administration issues for international revenue authorities, particularly with respect to GST and International Tax. However, it was noted that electronic commerce is not new business but rather a new way of doing business and that many of the issues posed by electronic commerce are simply extensions of existing problems created by international trade of goods and services.
These policy and administrative issues will continue to be addressed and monitored at a domestic level. Because of the global nature of electronic commerce it is also important that international co-operation continues with respect to taxation issues. The Government supports New Zealand's continued involvement in international forums such as the OECD and APEC. Even though electronic commerce does raise both policy and administrative issues, it also provides revenue authorities with the opportunity to improve service delivery, reduce compliance costs and build on tax simplification and voluntary compliance policies.
Issue: Income Tax, includinginternational tax principles, withholding payments, transfer pricing rules and administrative issues.
- Action: Monitoring and reviewing policy based on impact on revenue base, practical application of policy for electronic commerce transactions and discussions and participation in world fora, particularly the OECD, APEC and SAGAT for determining international guidelines.
- Key Agency: IRD.
Issue: Tariffs. On the surface, the Internet does not have immediate implications for New Zealand's import tariff policy. Goods ordered across borders via this medium are treated the same as consignments initiated through other means. Currently there is a $50.00 threshold on duty (including GST) charged on imported goods - that is if the duty is less that $50 it is not collected.
- Action: The growth in low volume/low value imported goods (below the $50 duty threshold) due to greater utilisation of the Internet, requires monitoring
- Key Agencies: Customs, Commerce, IRD.
Issue: Gaming: Cross border electronic commerce has the potential to reduce the revenue government gains from gambling activities, both directly, in terms of gaming duty, and indirectly, in terms of the funds available to the community through activities licensed under the Gaming and Lotteries Act.
- Action: Monitoring.
- Key Agencies: Internal Affairs, IRD.
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