Impact of E-Transactions on Direct Taxation

The spectre of massive amounts of economic activity conducted through electronic commerce has created concern among fiscal authorities around the globe. The cause of concern basically lies in anonymous, non-traceable transactions from unidentifiable locations. Most of the existing studies on e-commerce have examined the extent of its activities in the advanced countries. However, no attempt seems to have been made to examine the tax aspects of e-commerce. The present work, therefore, bridges a research gap: it identifies some of the issues related to direct taxation in the e-environment. A pre-structured questionnaire has been used to find out the practices and opinions of 75 tax professionals on various aspects related to direct -taxation. The study indicates that the tax professionals view residence based taxation as suitable for e-commerce organizations as well, yet the criteria for deciding the residence, that is, permanent establishment, needs to be modified. These findings have encouraging implications for policy regime and tax procedures.