Enabling Efficient and Inclusive E-Commerce Governance in Asia: A Focus on Digital Taxation

Please download the PDF-file to read the full article.

KEY TAKEAWAYS:

• The current regulatory and economic environment highlights an important set of poorly recognised, competing challenges for e-commerce: firms are increasing their digital presence at the same time that stressed government budgets are targeting digital products and services with new tax policies.
• This is the case in Asia too, the world’s fastest growing e-commerce market, where governments are erecting different types of taxation schemes on goods and services sold through e-commerce channels.
• Taxes on e-commerce in the region include digital permanent establishment rules, digital services taxes, consumption taxes like GST and VAT, and import duties on digital products.
• If not managed properly, e-commerce taxation policies can create knock-on effects that increase costs for actors down the value chain, such as micro, small and medium sized enterprises (MSMEs) that rely on e-commerce services to compete in foreign markets and that do not have the means to comply with complicated regulations across multiple markets.
• To date, there have been no regional governance structures that enable the development of inclusive e-commerce taxation policies across the region. To ensure that moving forward digital taxation policies do not endanger the growth of e-commerce, this paper brings forward the following guiding principles:
• Manage the risks of corporate taxation approaches by assessing the probable knock-on effects of policies on the broader e-commerce ecosystem — especially their potential to trigger significant price increases for e-commerce services.
• Adopt an MSME-friendly and coordinated approach to consumption taxes by streamlining the use of de-minimis thresholds and promoting the development of common approaches and standards for consumption taxes.
• Avoid customs duties on digital products by upholding the WTO moratorium on taxing electronic transactions, and work on regional initiatives to use non-discriminatory forms of taxation.