The UK policy document anticipates that this principle will be confirmed to extend to other intangible supplies both in electronic commerce and more widely. At present no new taxes are envisaged for electronic commerce, and existing tax principles are expected to be sufficient once the international framework for application of those principles has been put in place. In dealing with these concerns, the tax authority first needs to be able to identify that a transaction has taken place. At present, with a business such as this, the principal method of checking reported figures with the credit card companies who supply the means by which payments can be made. Once electronic cash becomes common, even this audit trail could become lukewarm.
Electronic cash has the potential to cause tax authorities even more concern than physical cash.
In addition to the electronic cash problem, encryption is an additional obstacle to tax authorities. Even where they suspect a transaction has taken place and find the appropriate files, if those files are encrypted they will be unable to access them without the code key to unlock it. The third party would hand over the key to the government if tax evasion or other offences were suspected. This proposal has been met with resistance over its implications for privacy. It would, in any case, be ineffective against methods of encryption under which details are hidden within another innocuous message so that it is not apparently encrypted.