OECD summit debates online taxation

Electronic commerce is hitting the world agenda this morning, as government officials congregate in Canada for an OECD (Organisation for Economic Co-operation and Development) summit. Today's discussions will focus on how online trading can be taxed.

Official bodies in the UK, ranging from the Inland Revenue and HM Customs and Excise, to the Department for Trade and Industry, have put out statements in support of electronic commerce. All agree with the OECD's stance that no new taxes should be set up - instead existing taxation methods should be applied to online transactions.

Speaking on Silicon.com's politics channel, deputy secretary-general of the OECD, Joanna Shelton, said: "Taxation will apply, but we are trying to find ways to make sure it applies in an equitable, fair way and that we do not see a need for new taxation just because something comes over electronic transmission."

HM Customs in particular will push the idea that a decision must be made on VAT. In a statement published today, it said: "Some work is necessary to ensure the effective and consistent operation of VAT systems, when dealing with international transactions...some changes in domestic tax rules and international tax treaties may become necessary."

European online traders are currently at a disadvantage, as they must add VAT to their prices. This is driving trade to the US, according to Andrew Nutman, consultant at Deloitte & Touche. "Small businesses are already moving to the US to avoid charges," he said.

Nutman added that whilst it takes around four years to renegotiate an international tax treaty, VAT regulations can be changed in less than two years.