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Virtual Intermediaries: Consumption Tax Problems in Japan, Europe, and the United States - The Case of the Virtual Travel Agent


Richard Thompson Ainsworth


Boston University - School of Law; NYU - Graduate Tax Program

October 26, 2009

57 Tax Notes International 865 (March 8, 2010)
Boston Univ. School of Law Working Paper No. 09-49

Abstract:     
Marketplace technology is (inadvertently) chipping away at the effectiveness of consumption taxes – the Japanese Consumption Tax (CT), the European value added tax (VAT), and the American sales tax (ST) are all affected. Frequently a technology-patch or a law change can repair the tax-damage, but sometimes even though a patch or a change is known the design of the levy (or the politics behind the design) impedes application. This paper assesses these consumption taxes by considering the impact that virtual travel agents have had on revenue yields. The paper draws specific conclusions for the Japanese CT, because this consumption tax seems particularly vulnerable to these intermediaries. Based on the structure of the Japanese Consumption Tax and estimates drawn from the performance of virtual intermediaries in the other consumption taxes, this paper estimates that approximately ¥26,532 million in CT has not been collected in Japan each year for the past eight to ten years. This is the case even though guests may believe that they have paid a full measure of the CT to reservation agents when on-line reservations have been made through virtual travel agents.

Number of Pages in PDF File: 21

Keywords: Virtual intermediary, VAT, Sales tax, Tax avoidance, Consumption Tax, Travel agent, Internet

JEL Classification: H20, H26, H29, K34, O33

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Date posted: October 28, 2009 ; Last revised: June 1, 2014

Suggested Citation

Ainsworth, Richard Thompson, Virtual Intermediaries: Consumption Tax Problems in Japan, Europe, and the United States - The Case of the Virtual Travel Agent (October 26, 2009). 57 Tax Notes International 865 (March 8, 2010); Boston Univ. School of Law Working Paper No. 09-49. Available at SSRN: http://ssrn.com/abstract=1494369 or http://dx.doi.org/10.2139/ssrn.1494369

Contact Information

Richard Thompson Ainsworth (Contact Author)
Boston University - School of Law ( email )
765 Commonwealth Avenue
Boston, MA 02215
United States
NYU - Graduate Tax Program ( email )
Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States
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