1. 1st Technical Presentation – The Role of E-Commerce and Its Impact on VAT Administration
By: LUVUUMA ROBERT
Manager International Tax.
Domestic Taxes Department Uganda Revenue Authority .

2. Outline Introduction Definition of e-Commerce Forms of e-commerce.
Characteristics of the digital economy.
Manifestations of e-commerce.
Basic rules of VAT Administration
Impact of e-commerce on VAT Administration.
Opportunities of e-commerce to Tax Administration
Future.

3. Introduction
The 1st item on eBay was broken laser pointer & the eBay founder was amazed that someone would buy something as ordinary as a laser pointer until he found out that the buyer was collector of laser pointers.

4. Introduction
The global economic landscape is constantly changing due to developments in Information and communication technology.
Outcome:
Integration of national economies and markets.
Enabled by:
- Affordable technology.
Improved business processes.
Massive innovation in all business sectors.

5. Introduction Current tax rules:
Ineffective and provide opportunities for tax avoidance.
Need to modify current tax rules to ensure that tax is collected in locations where value is created and economic activities take place.

6. Transactions involve:
Electronic -commerce
E-commerce refers to:
Sell and purchase of goods and services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing orders. (OECD)
Payment and ultimate delivery do not have to be conducted online.
Transactions involve:
Materialized e-commerce.
Dematerialized e-commerce or digital products.
New business models: Examples:
Sell and purchase: online shopping of tangible or intangible goods
Transport and logistics: able to track vehicles, cargo across continents, online travel bookings, warehousing,
Financial services: able to access services online, can manage your financial affairs online,
Manufacturing and agriculture: able to monitor production processes, greater precision
Education: able to provide/ receive courses remotely without need for face to face interaction, i.e. video conferencing, streaming, online collaboration portals etc
Payment services: can be cash payments, e-wallets/cyber wallets (wallets are charged with credits which can be spent online), mobile payments solutions i.e. can use mobile phones/ smart phone mobile card processors, etc
Online advertising: target and deliver marketing messages to customers, allows for precise targeting of customers, tack how users interact with marketed brands. Payment for adverts could be on basis of cost per action, cost per click inter alia
Cloud computing: provision of standardized, configurable, on-demand, online computer services such as storage, software, data management using shared physical sources i.e. networks, servers and application

7. Forms of e-commerce Business to Business (B2B)
Business sells goods and services to another business
Business to Consumer (B2C)
Business sells goods and services to individuals acting outside the scope of their profession.
Consumer to Consumer (C2C)
Business facilitate consumers sell their goods and services by publishing their information on the websites & facilitate the transaction.
New business models: Examples:
Sell and purchase: online shopping of tangible or intangible goods
Transport and logistics: able to track vehicles, cargo across continents, online travel bookings, warehousing,
Financial services: able to access services online, can manage your financial affairs online,
Manufacturing and agriculture: able to monitor production processes, greater precision
Education: able to provide/ receive courses remotely without need for face to face interaction, i.e. video conferencing, streaming, online collaboration portals etc
Payment services: can be cash payments, e-wallets/cyber wallets (wallets are charged with credits which can be spent online), mobile payments solutions i.e. can use mobile phones/ smart phone mobile card processors, etc
Online advertising: target and deliver marketing messages to customers, allows for precise targeting of customers, tack how users interact with marketed brands. Payment for adverts could be on basis of cost per action, cost per click inter alia
Cloud computing: provision of standardized, configurable, on-demand, online computer services such as storage, software, data management using shared physical sources i.e. networks, servers and application

8. Xtics of the digital economy
High reliance on intangible assets;
Massive use of data, including personal data;
Often multi-jurisdictional nature of the transactions.
Potential anonymity of the parties.
Intangibles:
These are key in the digital economy.
They are core contributors to value creation and economic growth of entities. E.g. software, licenses, patents, trademarks, trade names etc. Hence huge research and development expenses.
Data: businesses collect data about customers, users, suppliers and operations. This data may have value to a business as input to either improving existing products/ services or in providing products/ services to other groups of services.
Multi-sided business models/new business models:
All business models usually tell how an entity will create, capture and deliver value.
Developments in ICT have made it possible to do business on great scales and over longer distances than was beforehand possible.
A multi-sided business model is one that is based on a market in which distinct groups of persons interact through an intermediary or platform and decisions of a given group of persons affect the outcome for the other groups. It allows for easier reach of different sides of the business. E.g. business models of Amazon (call centre in India, Head quarters in Luxembourg, warehouses in Brazil but makes sales allover the world payments received in the USA) Google, E-bay, Apple
Which jurisdiction creates value?
This may be difficult to determine, unless a functional analysis is performed to determine the entities party to the value created within the value chain

9. Manifestations of e-commerce
Electronic banking.
Video-conferencing & teleconferencing
Tele-communication & massaging.
Online trading & shopping.
Online travel and hotel accommodation reservations.
Customer services.
Marketing and advertising

10. Basic rules of VAT Value added Tax:
Charged on value added along the supply chain.
Broad based tax on final consumption.
Stage collection process.
output/input tax mechanism.
Invoice based;
Good audit trail.
facilitates checking with Income tax system
VAT Mechanism:
Indirect tax: Final consumer pays the tax: Most individuals and other non taxable entities are end consumers, some entities providing VAT exempt activities are also viewed as end consumers.
However, entities other than those mentioned are mere collection agents. (charge out put on their taxable supplies and claim input on their taxable expenses and purchases)

11. Impact of e-commerce on VAT Administration
1. Mobility of customers/users:
Ability of consumers to use personal networks/ proxy servers to disguise location at which a sale takes place (knowingly./ unknowingly).
Many interactions on the internet remain anonymous which increases difficulty of identification and location of taxable entity.

12. Impact of e-commerce on VAT Administration
Obtaining acceptable documentation of proof become more difficult.
Dematerialization of trade.
Disintermediation removes taxing points
Audit of Sales Revenue: – due to sales and relevant information being conducted electronically, identifying the correct amount of sales and the correct amount of sales revenue is a challenge.

13. Opportunities of e-commerce to Administration
Improve service delivery
e-payments.
e- filing.
e-statements.
Improve compliance
Access to third party information.
Cross tax analysis.
Automatic validation.

14. The future?
Cross border supplies should be tax in the country of consumption.( destination principle).
B2B customers to be required to self assess VAT on remotely delivered services or intangibles acquired from offshore suppliers.
B2C for supplies, the country where the customer is located has the taxing rights.
Interconnectivity/ interface of tax administration systems with bank systems
Ref: OECD Guidelines on International VAT/ GST on place of taxation of business to business, supply of services and intangibles

15. END
Ref: OECD Guidelines on International VAT/ GST on place of taxation of business to business, supply of services and intangibles