Το ζήτημα της φορολόγησης του ηλεκτρονικού εμπορίου
Authors: Κοκόλια Ευγενία 
Published: August 2021

SUMMARY«THE SUBJECT OF TAXATION OF ELECTRONIC COMMERCE» With this doctoral thesis we attempt to approach the subject of taxation of electronic commerce, in order to analyze the difficulties to identify taxable transactions and propose the main principles of a system for taxation. This thesis deals with direct electronic commerce, in which lies the main research interest as in the indirect electronic commerce traditional taxation principles are not differentiated. Already from the beginning of the 1190s taxation of digital economy has drawn the attention of tax policy makers. On the one hand, the European Union, in the context of the “EU 2020” strategy, has selected the promotion of digital economy as a key point to the revamping of the economy and the exit from the financial crisis, whilst on the other hand, the specific aspects of taxation of the digital economy are being examined on a European and international level. The thesis is divided in five parts: in the first part, definitions are given on the internet, the electronic commerce and the factors that affect them, the second part deals with the current legislative framework for electronic commerce, in the third part the main principles for direct and indirect taxation for the electronic commerce are analyzed, the fourth part deals with electronic invoicing and finally, in the last part, suggestions and conclusions are formulated.As a matter of method, the application of classical theoretical concepts of tax law in the electronic environment is attempted. As a key challenge of a tax system for e-commerce we recognize the need to combine fiscal revenues and in the same time create and improve the current legislative framework, so that taxation does not constitute a barrier to economic development. In this context, the aim of this thesis is to extract useful, useable conclusions for both Greek and foreign tax authorities in the European Union and in the OECD level. In the first part definitions are listed and the concepts of the Internet, the World Wide Web, electronic commerce and, especially, direct ecommerce are explained. E-commerce is defined as the trade conducted by electronic means, ie, that is based on electronic data transmission, electronically conducted transactions, providing products and services for a fee using electronic equipment for communicating at a distance. The term indirect electronic commerce is used when it comes to electronic ordering of tangible goods that can be delivered only by traditional means, such as mail. Direct is characterized the electronic commerce that involves ordering, payment and delivery of intangible goods and services. Transactions of direct e-commerce transactions are divided into: (a) between business (Business to Business, B2B), b) business to consumer (Business to Consumer, B2C), c) business-Administration (Business to Administration), and d) between users (User to User). The second part is an analysis of the current EU regulatory framework for electronic commerce, as well as national legislation, which has transposed it. In the context of European Law the main text is Directive 2000/31/EC, which aims to promote the functioning of the internal market by ensuring the free movement of information society services information between Member States and identifies the concepts of "services of information society", "provider", "established service provider", "recipient of the service", "consumer", "commercial communications" and "regulated profession." Member States ensure that providing information society services cannot be subject to prior authorization or any other requirement having equivalent effect. As noted in the Directive, the Community legislature considered that the existing provisions of the national law of the Member States may apply respectively to e-commerce transactions, while according to the principle of subsidiarity, the European Union may interfere, only in areas deemed necessary to harmonize national laws in order to allow the free operation of the internal market. Moreover, in accordance with the principle of proportionality, the measures provided should be limited to the minimum necessary to achieve the objective of the proper functioning of the internal market. The third part analyzes the general principles of both direct and indirect taxation of e-commerce. This chapter examines the guidelines that have been adopted at OECD level and in the European Commission. First, the common international guidelines with respect to taxes on consumption, which were adopted at the Council of the OECD in Ottawa in 1998 on electronic commerce are presented: that is, neutrality [taxation should be neutral and not make distinctions between electronic and traditional commerce], efficiency [compliance costs for taxpayers and administrative costs for tax administrations should be minimized], certainty and simplicity [clear and simple tax rules so that taxpayers are aware of the tax consequences of a transaction], effectiveness and fairness [tax laws should be effective and prevent tax avoidance or evasion at most], flexibility [tax systems need to be flexible and dynamic to keep pace with developments in technology and commerce]. In this context it is noted that national legislation and international law principles of taxation on electronic commerce should be structured in such a way as to maintain fiscal sovereignty, to achieve equal distribution of the tax base of e-commerce between the states and to avoid double taxation and non-taxation. Moreover, the guidelines for consumption taxation adopted in 2001 by the Commission for Fiscal Affairs of the OECD for the consumption taxation of cross-border services and intangible assets, in the context of electronic commerce are discussed. In particular, for transactions between businesses (B2B), the place of consumption will be considered as being the place where the recipient has established his business presence, while transactions between businesses and private individuals (B2C), the place of consumption will be considered the usual residence of the customer. Subsequently, the particular issues that arise for direct and indirect taxation of the digital economy are analyzed. In the field of direct taxation, the concept of global taxation of income (residence criterion and the criterion of the source of income) is examined. For the application of double tax treaties, it is observed that the location of a business is determined primarily by the place of effective management. However, in e-commerce, the concept of "place of effective management" can no longer be applied with ease. In this context, the draft published by the OECD to discuss the interpretation of the term "effective management" with relative factors and prioritization criteria proposed to be taken into account when determining the "place of effective management" is explained. Then, it is argued that the specific tax issues raised in relation to direct taxation are primarily to investigate whether the traditional concepts of permanent establishment and the State of source should be revised, the characterization of income and finally, to investigate whether the arm's length principle is sufficient for transfer pricing transactions in the digital economy, as well as the investigation whether the income from new business models of the digital economy are characterized as profits from the sale of goods or services or as rights (royalties).On the question of the permanent establishment, the OECD report which includes comments on the application of Article 5 of the Model Convention for the permanent establishment and final modifications to the comments on Article 5 for electronic commerce are presented. Subsequently, theories to challenge the concept of the permanent establishment, the arguments for maintaining the principle of permanent establishment as a criterion for direct taxation of e-commerce and alternative proposals to replace the concept of permanent establishment are analyzed extensively. It is alleged that the issue of the taxation of income in the State of origin or residence in international transactions is directly related to the characterization of this income. Special issues arise for the characterization of electronic services and intangible digitized products, which can be classified as services, as rights or goods. As mentioned, income from royalties is primarily subject to withholding tax in the source state and income derived from the sale of goods or services is generally subject to income tax in the State of the permanent establishment.It is noted that the special characteristics of electronic commerce make it particularly attractive for abusive transfer pricing practices in the digital business sectors. These transactions will be more difficult to identify due to the transfer of entrepreneurship in the electronic environment. A first issue identified is the displacement of the actual place that economic activity takes place, for example by selecting the country that has the lowest tax rate, regardless of where the transaction actually took place. A second issue is the difficulty of applying conventional principles for intra-group transactions in the digital economy, resulting in the transfer of taxable income or complete tax avoidance. It is argued that if, according to the analysis (in section 3.1.) the criteria for defining a server as a permanent establishment are met, the next issue to be addressed is how much income can be distributed / attributed to such a permanent establishment. Furthermore, the emerging issues of income distribution and transfer pricing in intra-group transactions are addressed. It is recognized that, when applying the traditional principles of profit-sharing it should be borne in mind that the use of the Internet has changed the business models of multinational companies, which include gathering information data, other business synergies, particularly services, customer support and intangible goods. Accordingly, the consideration of indirect taxation issues focuses, in direct e-commerce, namely electronic commerce on digital services and not to indirect electronic commerce, which refers to the delivery of goods or services, for which an order has been put electronically but physical delivery is conducted through the traditional (off-line) mode. Moreover, it is mentioned that "the application of the VAT system in (direct) e-commerce is the most important challenge in the field of VAT". In this field, we analyze the common system of VAT, as provided for in Directive 2006/112/EC, and the provisions for direct electronic commerce, which have gradually been adopted from 1.1.2002. The legislative provisions and relevant case law is developed, which define electronically supplied services, taxable persons, the permanent establishment for VAT purposes and the place of supply for electronic services and their respective tax liabilities in accordance with the current tax legislation from 1/1/2010 to 31/12/2014 and from 01/01/2015 and onwards.It is commented that the key question is mainly the determination of the jurisdiction that has the right to tax the provision of electronic services. VAT and other indirect taxes/duties are designed to tax benefits at the place of actual consumption. However, the intangible nature of electronic services makes taxation at the place of consumption tricky, especially because there are different opinions on what constitutes a taxing jurisdiction. In practice, taxation of services and intangible assets under a "strict" consumption test can lead to complex situations, in which tax filling and attribution may result in high administrative costs for businesses and high control costs for tax administrations. VAT legislation overcomes these difficulties with the use of presumptions for determining the place of consumption (proxies), especially in B2C sector. The confirmation of the status and location of the customer lies mainly in the service provider. The provider must indicate whether the client is a resident of his own or another jurisdiction to apply the same rate. Business can use the Mini-One-Stop-Shop special scheme, register in their Member State of establishment and submit a single statement, which contains the electronic services and the tax due per Member-State. The tax due is then distributed and assigned to the Member-States of consumptions. Finally, the very interesting additional indirect tax matters that arise in the U.S. and Canada are analyzed.In the next chapter the current provisions for electronic invoicing, which can boost e-commerce and facilitate audit checks for the fulfillment of tax obligations are developed. The harmonized invoicing rules firstly introduced by Directive 2001/115/EC are an important facility for business operating in several member states of the single market and comply with a single set of simplified invoicing rules applicable throughout the European Union against different rules in force in accordance with national laws. As noted, the Directive has contributed to reducing the administrative burden for business, especially SMEs and the development of e-commerce. Directive 2010/45/EU that followed updated these rules: it includes measures regarding invoicing rules, the contents of invoicing, electronic invoicing, storing invoices and an optional scheme based on monitoring cash transactions (cash accounting scheme), and aims to create a modern and harmonized set of rules that simplify the invoicing requirements for business, while enabling the tax authorities to take effective measures to ensure the payment of taxes. The last, very interesting chapter sets out the findings and recommendations for improvement of the legislation whist the relevant administrative implications. As discussed in the chapters of this thesis, the direct e-commerce may include mobile, distant or transactions in which the provider may be located away from the tax jurisdiction. Consequently, customers can avoid paying taxes, putting the traditional businesses in a competitive disadvantage and reducing the total tax revenues. The thesis concludes that the principles of the tax system for the direct electronic commerce should take into account the following considerations: 1. Transactions with cross-border nature should not be taxed less than the national trade, so as to avoid evasion and harmful tax competition between member states. 2. The delocalization of economic activity due to the fiscal framework should be avoided, creating distortions that hinder development. The tax system which would be imposed should be based on neutrality, administrative simplicity and fairness in the attribution of tax revenues between the tax administrations involved. Fiscal neutrality requires that transactions are taxed equally, so purchasing decisions for products, services and rights are truly made in accordance with specific criteria and not because of tax rules. If e-commerce is not taxed like other forms of trade distortion of competition may arise. The problem can occur both internationally and domestically. Domestically, issues arise as regards competitive fairness between traditional and online businesses. Internationally and between states of America, where there are different systems of income and consumption the complex issue of relocation business in tax havens, because of the tax advantages they provide and the intangible nature of electronic services is raised. Considering the above, it is necessary that globally uniform rules relating to the direct electronic commerce should be adopted. In the field of direct taxation, as there is no legislation at the level of the European Union, Member States remain free to set tax rules as they deem appropriate and to give taxing rights between them, not always harmoniously. It is noted that the digital economy is based strictly on intangibles, the use of personal data, multilateral business models have been developed that create value by using free online applications and also difficulty lies in determining the tax jurisdiction in which such added value is created. These factors raise important questions about the way businesses operate and generate profits in the digital economy and consequently in the way that traditional notions of State of establishment and host source State are applied. At the same time, in the thesis it is acknowledged that the alternative digital business models that may lead to relocation in other tax jurisdictions, thus resulting in the redistribution of taxable income do not mean by definition that there is an erosion of the tax base and profit shifting. A thorough study of the business models in the digital economy is required in order then to determine whether and to what extent it is necessary to reform the current rules, taking into account the specific characteristics of the digital economy in order to avoid erosion of the tax base and profit shifting (also in the field of indirect taxation). The principles that should be established for the direct taxation of e-commerce are:1.Regarding the broad interpretation of the permanent establishment and its commentary to Article 5 of the OECD Model Convention on avoidance of double taxation, which stipulate that even a server can be considered as a permanent establishment, we believe that they must be addressed with skepticism. If a website or a server may be classified as a permanent establishment, it may be installed in a "tax haven" while the main business functions are carried out through outsourcing in the EU, which will not be entitled to impose direct taxation. Moreover, the definition of a server as a permanent establishment server has dual effects on Member States of the Union. On the one hand, a Member State will have the right to tax the income of a permanent establishment of a foreign company, but if it is a Member State of establishment for a business, it would not be entitled to tax the income of a permanent establishment in another country or it should provide credit for the tax paid abroad. As a most reliable tool it is considered the establishment of the "economic substance" of the presence of a company, which provides online services rather than trying to collect revenue from theoretical electronic equipment that will be difficult to detect. In conclusion, the broad concept of the permanent establishment may be an element of tension for harmful tax competition, as opposed to the initiatives taken at the EU level and in the OECD.2.Regarding companies involved in e-commerce a problem that can occur is to interpret the criterion of the agent as a permanent establishment under Article 5 § 5 in a very broad rather than in a narrow sense. A proposal that could be argued would be to add to the commentary of the OECD Model convention a provision according to which even if the foreign company is not actively involved in establishing the contract with the customer, if the person who makes the contract simply follows the instructions given by the foreign firm which effectively retains the discretion to determine the terms of the transaction, that person should not be treated as the person who makes contracts in the name of a foreign company within the meaning of Article 5 § 5.3.Consequently, the OECD work should focus on the constituent elements of the "economic substance" and "effective management" of the company that provides online services and adjusting the methods of allocation of taxable income and profits.4.At Union level, a solution that could be adopted and proposed as the EU contribution to the OECD is an amendment to the Council Proposal for a Directive on the Common Consolidated Corporate Tax Base. Specifically, the proposed rules would include a specific definition for permanent establishments for the purposes of ecommerce business and income from these facilities would be included in the factors of calculation of the tax base. 5.Equally, an alternative proposal, which could be argued, would be the harmonization of direct and indirect taxation of (direct) ecommerce. A system could be set up that is based on the principle of taxation at the place of consumption. This would be in conflict with the existing principles of international tax law for taxation in the State of establishment and taxation in the source State only in cases when income is assigned to an independent entity. Such a solution would require international agreement and development of the technical infrastructure, through the use of electronic invoicing and certified third parties for its implementation.6.Finally, it is concluded that, regarding direct taxation, it is necessary to agree on a common methodology between the European Union and the OECD regarding the tax treatment of direct electronic commerce, in the context of the multilateral convention on mutual administrative assistance in tax matters. Under this context, there should be agreement on the exchange of information in this area, in order to ensure the imposition of taxation. In the area of indirect taxation, it is pointed out that, if the legal certainty is not guaranteed at the EU level, Member States are likely to introduce administrative decisions at national level. However, efforts should be intensified for establishing guidelines at EU or even global level, in the OECD framework in order to ensure the uniform application of the common system of VAT. The first challenge lies in determining the place of taxation and has in general been met by the tax authorities. Some States define it as the place where the customer is established (and using evidence to determine it) while others have taken administrative measures to ensure the implementation of adopted general principles for taxation of the electronic commerce. The main difficulty lies in identifying the tax base of the provider, who is installed in a different location than the location of the customer. It should be noted that the market has been dominated up to now by the presence of a small number of recognized companies with established national or international logos. The second challenge relates to the treatment of all transactions arising from the development of electronic commerce. In addition to traditional digitized products (music, software, books, movies) new product are emerging such as packages of photos, music and information. The rules for the classification between goods and services and the determination of the place of supply of services should be adapted to changes. These developments affect the extent that tax authorities have the possibility to check if business have fulfilled their obligations.In this vein, it is argued that recent legislative initiatives of the European Commission, both at Council level to executive level responsibilities Commission move in the right direction. It is necessary to raise international awareness of the issue of non-EU businesses that need to comply with the tax rules of the European Union. The adoption of the negotiating mandates for the European Commission, on behalf of the European Union, to conclude agreements for administrative cooperation in the field of VAT with third countries is expected to be a step in the right direction in order to ensure the compliance of third countries’ business. Apart from the legislative framework, the work should focus on the use of new technologies, through the simplified electronic reporting, development of e-invoicing, development of alternative methods for the efficient collection of taxes. Finally, as in direct taxation, one solution would be to agree on a common methodology between the European Union and the OECD regarding the tax treatment of direct electronic commerce, in the context of multilateral convention on mutual administrative assistance in tax matters. Under the convention, there should be agreement on the exchange of information in this area, in order to ensure the enfrorcement of taxation.