Readiness of Ghana Revenue Authority on the Taxation of E-commerce

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UNIVERSITY OF PROFESSIONAL STUDIES, ACCRAEFFECTIVENESS OF GHANA REVENUE AUTHORITY ON THE TAXATION OF E-COMMERCEGROUP: 68NAMES ID NUMBERSSIGNATUREAMARH EVODIA 10010411………………BREDU JULIET DARKOAH 10012143………………SUITOR KWAME BISMARK 10012274………………OBENG VICTOR 10010671 ………………A DISSERTATION PROPOSAL PRESENTED TO THE DEPARTMENT OF ACCOUNTING AND FINANCE OF THE FACULTY OF ACCOUNTING AND FINANCE. UNIVERSITY OF PROFESSIONAL STUDIES, ACCRA (UPSA) IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF BSc. ACCOUNTING.SUPERVISOR: MR. JOHN AMOHSIGNATURE: ……………………….SUBMISSION DATE: SEPTEMBER, 2016SECTION ONE1.0 Background of the Study Since the evolution of the internet in 1986 and the public attention that it acquired in 1990s, the internet has continued to grow and revolutionize every sector of the economy. One of the developments is the growth of electronic commerce, which has made the world witness changes in economic and social life. E-commerce has brought not only simplification in ways of life and trading but also challenges to different industries, sectors of the economy and to stakeholders that have necessitated changes or slight adjustments to the traditional way of doing things in order to keep pace with the new technology.According to Rifat, Amazon sells tangibles, intangibles and services worldwide that totaled $34 Billion USD in 2010. At more than 97 million active users globally meet to sell and buy online in total amount of $62 Billion USD in 2010.When e-commerce started in the early 1990s, no-one expected the growth explosion it experienced in the latter part of the decade (Boeth, s.a.). E-commerce is one of the fastest growing retail sectors in the global economy. There is no question that e-commerce is here to stay as an integral component to a successful retail sales strategy (Bank of America, 2012). Looking forward, there is no indications that this sector supported by high technological progress will ever slow down (Belousova, 2010). The potential for ecommerce transactions to gain a sizeable share of consumer and business purchases appears to be large, although it is difficult to quantify (OECD, 2000a)E-commerce is a generic term to describe the technology, processing and operations that occur when business or financial transactions are conducted by electronic means (Van der Merwe, 2003). Tax problems are primarily caused by electronic commerce transactions when they cross boundaries between taxing jurisdictions (McLure, 2003). In the debate in the European Union on The Value Added Tax (VAT) Policy, it was focused on how best to extend the existing tax system to e-commerce transactions in the form of digitised products (Zodrow, 2003). The first attempts to establish the European Union’s rules on taxation of Internet transactions were made by the Council Directive 2002/38/EC on 7 May 2002 (European Commission, 2002), which was passed in line with the principles of e-commerce taxation developed by the Organisation for Economic Co-operation and Development (OECD) (OECD, 1998). The Council Directive introduced additional measures necessary for the registration of eservice traders for VAT purposes not established within the community and for distributing the VAT receipts to the member states of the European Union where the services were used. These principles establish that the rules for consumption taxes (such as VAT) should result in taxation in the jurisdiction where consumption takes place (Anon, 2013). These measures mean that the EU became the first significant tax jurisdiction in the world to develop and implement a simplified framework for consumption taxes on e-services in accordance with the principles agreed within the framework of the OECD (Anon, 2013). Following the international trend to create a taxation system for e-commerce applicable to the European Union and other countries, the Minister of Finance, Pravin Gordhan of South Africa announced in the 2013 Budget Speech that all foreign businesses supplying e-commerce in South Africa will be required to register as VAT vendors (Nel, 2013).The electronic transmission of images of certain products such as newspapers, magazines, reference material and photographs, and the downloading of computer software and recorded music, are becoming increasingly popular (Hargitai, 2001). The rapid growth in both the number of people who use the Internet and its commercial applications has been stimulated by technological innovations and their diffusion (OECD, 2000b). It was identified early that electronic commerce transactions had the potential to be one of the great economic developments of the 21st century. The information and communication technologies, which underlie this new way of doing business, opened up opportunities to improve global quality of life and economic wellbeing. Electronic commerce transactions had the potential to spur growth and employment in industrialized, emerging and developing countries (Committee of Fiscal Affairs, 1998).E-commerce is a new way of conducting commerce that has revolutionized the way in which business are being conducted worldwide. In e-commerce, neither physical presence nor physical delivery of goods and services is necessary. The new technology has transformed creation of product and services marketing of goods and services, business processes, organization structure of the enterprise and other functional areas of business.E-commerce is a subset of e-business. It is a commerce or conducting transaction using network of computers and telecommunications that is, internet. It is an exchange of goods and services and the financial considerations for them. Business includes a whole set of transactions that must be completed before the goods and services change hands for the financial considerations. E-commerce links employees and internal business processes through intranet, the business relations with suppliers, customers through extranets and finally exchanging goods and services for a value. Here, goods and services can be directly delivered on the net or by conventional mode and similarly, payments can be affected through electronic means.The first phase of e-commerce threw up a new business nomenclature using various combinations of business and consumers. It has its own advantages and disadvantages as in traditional business methods. Thus, e-commerce has necessarily changed the world economy in a dynamic and interactive pattern. Taxation definedCompulsory monetary contribution to the state's revenue, assessed and imposed by a government on the activities, enjoyment, expenditure, income, occupation, privilege, property, etc., of individuals and organizations ( relationships between taxation and technological developments have always been interactive, dynamic and complex.However in the case of e-commerce the added question is how to reconcile national fiscal boundaries with the borderless world of the internet.A government's authority to tax had always been based on territory and jurisdiction. These systems now face a serious challenge from development of e-commerce. The trade in goods and services over the Internet has fundamentally altered the accepted boundaries and conventions. Some of the concepts underlying the principles of international consensus on taxation were always flawed, but those flaws have become much more apparent with the advent of e-commerce. E-commerce makes the concepts of permanent establishment (to determine location of manufacture), point of sale (for the application of relevant tax rates), income classification (based on source of income), product classification (for prefe


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Bachelor Thesis




Accounting, Finances and Investment, Public Finances and Taxation.



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