E-Commerce and Its Issues on Cybertaxation in Canada

The development of E-Commerce has a great impact on the Tax Authorities and their tax policy. Canada is one of the most well developed countries in E-Commerce, and therefore Canadian Tax Authority (CCRA, former Revenue Canada) faces myriads of issues either on tax rules or tax administration in the emerging cyberspace. In discussion of Cybertaxation, Canada has taken an active and leading role. Canada has expressed its opinion on the issues of Cybertaxation in "Canadian Report" and "Canadian Response". Canada's committment to the international agenda is demonstrated by hosting the OECD Ministerial Conference on Electronic Commerce in Ottawa, where its official Taxation Framework Conditions for E-Commerce were adopted. The challenge for Canadian Cybertaxation policy is how to maximize the potential efficiency gains of E-Commerce and at the same time protect their revenue base without hindering the development of E-Commerce. The policy discussions and debates with respect to Cybertaxation have to pass through two-fold (two-step) basis of judgement: "Whether to tax E-Commerce or not?" and "What and how to tax E-Commerce, if taxed?". In order to tackle the former problem, a triple-criteria framework for evaluation (based on the Musgrave's formula) is suggested as a tool of judgement analysis such as Economic Efficiency, Economic Equity and Legal Justice and Economic Stabilization. The latter question contains both taxation rule (principle) ("What to tax?") and tax administration ("How to tax?") issues. Adopting a holistic approach, using a technical framework and planning tools. will facilitate the development of a practical plan for managing the Cybertaxation issues successfully. Canada has to continue to participate in international discussions and cooperations on Cybertaxation issues.