Canada: Canada's Tax Committee On Electronic Commerce Reports

Last Updated: May 25 1998

PLEASE NOTE: THIS INFORMATION WAS ORIGINALLY SUBMITTED BY COOPERS & LYBRAND, CANADA

On the same day as most Canadians were concentrating on filing their 1997 personal income tax returns, the Revenue Canada Advisory Committee on Electronic Commerce ("the Committee") had its report ("the Report") issued by the government. The following discussion provides some background information on electronic commerce ("E-Commerce") and highlights the Committee's general recommendations. Subsequent articles will comment on some of the seventy-two detailed Report recommendations in the area of income taxes, customs duties and tariffs.

Background

Significant advancements and innovations in information and computer technologies coupled with growing domestic and international trade have transformed the worldwide economic environment. Electronic commerce is the foundation of this transformation, and represents the most radical force of change that nations have encountered since the industrial revolution. It is affecting every economic sector as well as social activities and government operations.

E-Commerce can be broadly defined as the delivery of information, products services or payments by computer, telephone or other automated media. This definition encompasses many kinds of business activities that are being conducted electronically, and means much more than merely the purchasing of goods and services through electronic means.

E-Commerce includes all types of commercial transactions conducted by electronic means using computers and telecommunications networks. This would include:

  • electronic banking;
  • electronic purchasing and restocking systems;
  • electronic payment systems;
  • all forms of trade in digitized goods and services; and
  • all commercial transactions conducted by the Internet, telephone, and fax.

E-Commerce has proven to be an invaluable tool for enhancing business operations, and for creating opportunities for growth. However, it has also given rise to important questions and challenges that are particularly relevant to the issues of taxation. Increased use of electronic systems in commercial activities, including the Internet, makes it important that all taxation authorities review the administration of their tax systems. This must be done to ensure that tax laws are applied appropriately and that the integrity of the tax base is maintained in an E-Commerce environment.

For example, commercial activity through the Internet poses problems for determining where an activity took place. Moreover, since such activity leaves no paper trail, problems arise that are similar to those raised by the underground economy. E-Commerce also creates difficulties for tax administration in terms of identifying the governmental jurisdiction(s) which has the authority to tax incomes and transactions conducted by way of E-Commerce.

E-Commerce is putting pressure on traditional approaches and rules involved in tax administration. All tax authorities must deal with the enhanced evasion and avoidance opportunities presented by electronic commerce.

Advisory Committee on Electronic Commerce

The Canadian Minister of National Revenue established the Advisory Committee on Electronic Commerce in April 1997 to examine the implications of E-Commerce on tax administration. The Committee's April 30, 1998 Report confirms that certain fundamental principles of tax policy and administration are likely to be called into question as a result of the growth of E-Commerce through the convergence of information and communications technology. The Report contains a total of seventy-two detailed recommendations in the area of income taxes, commodity taxes, customs duties and tariffs. (Specific comments on a number of these detailed recommendations will be the subject of subsequent articles.) In addition, the Report made some general recommendations for government aimed at promoting the development of E-Commerce in Canada.

General Recommendations

The Committee's general recommendations can be summarized under four headings as outlined below:

Leadership

Since E-Commerce is driven by market forces, and by new and rapidly developing technologies, the private sector should lead in its management.

By fostering a favourable business and regulatory environment, Canada can assure itself of a leadership position in the new world of E-Commerce.

The Government of Canada should affirm its commitment to the goal of Canada becoming a world leader in E-Commerce, and confirm its belief in the central role of the private sector in accomplishing this objective.

Tax and Regulatory Environment

In cooperation with other governments in Canada, the Government of Canada should assist business in the pursuit of E-Commerce activities by providing a tax and commercial environment that would be viewed as a model of cooperation throughout the world.

Canada should take the lead to ensure a tax neutral position with regard to E-Commerce transactions since new or additional taxes would remove the incentive for corporations to continue conducting business in Canada and dampen the future growth of the Canadian economy.

Revenue Canada and the Government of Canada should continue to study and measure the points at which there is a risk of loss of tax revenue, and the extent of those losses, resulting from E-Commerce activities before any new policies or taxes are introduced.

Policy and Legal Environment

Governments should create a favourable policy and legal environment for the growth of E-Commerce and ensure that the network and physical infrastructure requirements for E-Commerce figure prominently in policies and programs.

All levels of government in Canada and key players in the private sectors should work co-operatively to build trust in the electronic marketplace and establish clear policies on the recognition of digital signatures, the use of encryption, and protection of consumer rights and personal information.

Immediate action should be taken by Revenue Canada and the Government of Canada to bolster consumer confidence in the electronic economy and to clarify and communicate the application of existing policies and practices to E-Commerce activities.

International

Revenue Canada and the Government of Canada should promote consistency in E-Commerce policies among all levels of government in Canada, and among national governments around the world.

In order for Canada to play a lead role in developing a clear set of international rules for transnational E-Commerce, Revenue Canada should work to ensure the success of the upcoming Organization for Economic Cooperation and Development ("OECD") Ministerial Conference (Ottawa, Canada - 7 to 9 October 1998), especially in relation to taxation issues.

Consistent with the theme of private sector leadership, Canadian business and industry associations should continue to work with their international colleagues in the management, promotion, and development of E-Commerce.

These general recommendations of the Committee are commendable. With the concentrated co-operative efforts of all parties - public and private, domestic and international - we all hope they can be attained!

The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.

While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a Coopers & Lybrand professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your Coopers & Lybrand advisor, or: David W. Steele, Coopers & Lybrand, 145 King Street West, Toronto, Ontario M5H 1V8 Canada, Fax: 1-416-941-8415, E-mail: Click Contact Link
David W. Steele
PricewaterhouseCoopers
145 King Street West
Toronto, Ontario  M5H 1V8
Canada
Fax:    1-416-941-8415
E-mail:    Click Contact Link 

Click Contact Link

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.