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The fast advance of information and communication technologies (ICT) has offered global business unprecedented opportunities. Even small businesses wherever they are located could sell their products and services to a customer in a remote place around the clock. The so called electronic commerce ,although not precisely defined or defined varyingly, involves the application of new ICT to a broad range of production and distribution activities being conducted on a global scale through channels which are digital and permit to do business interactively at any time, at any place. The basic characteristics of Electronic commerce are: simultaneous, dismantling geographical difference, lack of central control, global, anonymous, untraceable, etc. These characteristics have their tax implications and explain why so many are concerned about tax issues of the internet, why the most fundamental income tax challenges of e commerce is jurisdictional. One element adds to the complexity of this problem is that e commerce is still growing rapidly and becomes mainstream business in a global scale. See the Chart below.
Note: The largest impacts yet to be felt.Most of the world is still on the bottom of the S curve.
The 2000 market correction (.com to .bomb) merely slowed the growth of e-commerce from unbelievably fast to exceptionally rapid.
Concerns over the possible erosion of tax base by international electronic commerce have inspired numerous literatures and discuss papers since the first release of US Treasury Paper Selected Tax Policy Implications of Global Electronic Commerce. National governments, international organizations and tax experts reached a Consensus that it would not be easy to apply current PE rule in electronic commerce which it is not designed for. The difficulties are : the website is by itself combination of software and digital data stored in the server and does not amount to the place of business,
the visibility of website will no lead to the existence of PE,
the location of servers are too easy to be manipulated to be fixed, the automation of website and server normally does not constitute carrying business activities, websites are hosted by Internet Services Provider and the business does not have at its disposal the server and the location of the server, the telecoms company and ISP provides only internet access ,date storage, transit or other auxiliary services and could not be an agency PE of the foreign vendor.
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