Online Trading Tax Problem Research

E-commerce is divided into on-line and offline transaction. Since the object ofon-line transaction is digital products, the on-line transaction is also known as digitalproduct transaction or direct e-commerce. The digital product is digitally encoded,and then transmitted and delivered in the electronic way, which is independent fromthe products in physical carrier (such as tape, disk). During the past decade, with theincreasing popularity among the consumers of the the on-line shopping, as a part ofthe e-commerce, the development of the on-line transaction has made great success.The total amount of e-commerce in China reached730.3billion last year, which isexpected to reach1.0103trillion in2012. Although we haven’t got the specific dataabout on-line transaction,with the government strengthening intellectual propertyprotection,we can reckon the the on-line transaction has entered into its boom time.On-line transaction, as a completely new born thing in many developingcountries, is lack of systematic taxation legislation in the last decade. ChineseTaxation Bureau has set up a research group, trying to settle the problem regarding theon-line transaction taxation. Through a lot of legal research, this paper found that thestudies about the taxation of on-line transaction over the past decade, no matter athome and abroad, were abstract and general, most of which focused on principles andcrisis rather than the practice or practical resolutions. Compared with the earlierpapers and writings, there is barely breakthrough in the latest papers. Due to thebooming of on-line bookstore and e-books, a prestigious bookstores known asShanghai Bookstore on Huaihai Road as well as other numerous bookstores wentthrough bankruptcy in recent years, and this paper found that one of the underlyingreasons is that the on-line bookstore and e-books are on the status with no taxation.This paper is of the opinion that the problems regarding the on-line trading taxationcould no longer be ignored by the public.The reasons why this paper just focuses on the tax issues of on-line transactionsrather than the entire e-commerce are as following: First, the offline transactions and online transactions have the "commerce flow"and "cash flow"."Commerce flow" herein refers to the marketing work, such as thenegotiation of the orders."Cash flow" herein refers to the movements of the capitalregarding the transaction. Both "commerce flow " and "cash flow" are the key pointsof the e-commerce taxation. Once the two points are clear enough, the problemsregarding the offline transactions could be resolved easily.Second, the offline transaction is more like traditional transaction, the existingsystemic tax rules for the taxation of traditional transaction can be applied to theoffline transaction.Third, the object of online transactions is digital product being transmittedcompletely through the electronic delivery, the characteristics of which are differentfrom these of offline transactions, and many labour service achievements of whichcan be delivered in the forms of the digital products. For instance, the lawyer’s legalopinion could be delivered to clients via email.Taken as a whole, the online trading taxation issues are more complex than thatof offline transactions, and at the same time, the former covers most of the parts of thelatter. Therefore, the research of this paper focuses on the taxation of on-linetransaction.Scholars have different views on the legal nature of the digital product, some ofthem regard the digital product as goods, some of them regard it as service, and someare inclined to define it depending on its content. This paper are inclined to agreewith the last theory, for this theory can prevent the transform of the digital productsfrom tangible products to intangible digital product, in order to avoid VAT. This paperbelieves that the taxation authorities should focus their supervision on the "commerceflow" and "cash flow"of on-line transactions, regardless whether it occurs through theindependent platform or the intermediary platform, preventing the on-line businessoperators to falsify the trading data. The tax authorities should establish suitable taxregistration system and reasonably classify the taxation categories and tax ratesfor thedigital product. The on-line business operators should automatically choose the taxcategories when the product are displaying on the shelves, and the automatic tax deduction system could levy the corresponding turnover tax. Taxation authorities, atthe same time, should have the "commercial flow" and "cash flow" data stored in thecategory of income tax, which is levied under the name of the o-line businessoperators.This paper, based on the object and the taxation jurisdiction of on-linetransaction and comparison with the taxation legislation of other countries etc, desiresto put forward a new resolution to resolve the taxation issues regarding the on-linetransaction in China. I hope the research in this paper will make some contribution tothe Chinese taxation legislation on the on-line transaction.