Bangkok Post: “Parsing E-commerce tax options”

E-commerce, the online trading phenomenon breaching global boundaries, has enabled companies and even individual vendors to increasingly engage in transactions with customers without any of the contacts traditionally associated with sales of goods and services.

With an estimated value that runs into trillions of baht a year, it’s little surprise that the Revenue Department has been tempted to claim a piece of the online business pie.

The department last week announced its plan to catch up with the booming e-commerce business by levying a 5% withholding tax on all online purchase payments to be collected at the banks…

Bunyati Kirdniyom, director of government affairs for Vriens & Partners Pte Ltd, a Singapore-based advisory firm, said the withholding tax (WHT) is a deduction from payments made to suppliers who provide a service in the respective jurisdiction.

A WHT is enforced by most countries as a common tax practice imposed on both residents and non-resident people, he said.

But he added: “The nature of online or over-the-top content business models, which operate via the internet or digitally and across borders, will challenge the WHT philosophy, which was designed for the physical world.

Mr. Bunyati said issues determining jurisdictional authority to impose a tax on internet activities include where such service is being delivered and how to track each transaction.

To ensure fair tax collection and distribution in a digital, trans-border world, there has been a global discussion of possible taxation models based on origin of the service, destination of the service, and nationality of service providers or buyers. An unfair, fragmented and complicated tax landscape could stifle innovation and create unnecessary barriers to small domestic players and startups, he said.

“Certainly this is not something only one country can decide. Regulators need to collaborate in the digital world.”

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