Consumption Taxation in a Digital World: A Primer
CentER Discussion Paper No. 2004-102
28 Pages Posted: 2 Dec 2004
Date Written: September 2004
The paper reviews the economic and administrative issues that arise in the taxation of electronic commerce; addresses how best to meet the criteria of an ideal tax system; and examines recent policy developments. It is argued that destination-based taxation - as is presently the norm for goods taxation - is technically more complex for digital products and intangible services sold over the Internet, reflecting the difficulty of determining the location of the buyer and seller. Most of the potential solutions to this problem require a great deal of administrative cooperation between national tax authorities. Case studies of several countries show that policy responses to electronic commerce have differed, with the European Union taking the lead on implementing a system of destination-based registration.
Keywords: Destination principle, international consumption taxation, electronic commerce, origin-based taxation, cross-border trade
JEL Classification: H20l, H73
Suggested Citation: Suggested Citation