Study of the Legal Problems Concerning Taxation in Electronic Commerce in China - Essay Example

The definition of electronic commerce can be found in Internet Tax Freedom Act as “any transaction conducted over the Internet or through Internet access, comprising the sale, lease, license, offer, or delivery of property, goods, services, or information, whether or not for consideration, and includes the provision of Internet access”[1

 E-commerce has developed rapidly and has huge potential in the 21st century. In August 2005, one of the research institutes in America published that in the past several years the development rate of electronic commerce was up to 97%, occupying 8% of the total trade in America.3 According to United Nations Conference on Trade and Development, the electronic commerce total trade figure was 12 万亿dollars in the world in 2006, which is 18% of international trade volume.

It also indicated that electronic commerce will keep increasing at a rate of 50% in the future. In China, electronic commerce started developing rapidly in recent years, especially in big cities such as Beijing, Shanghai, and Shenzhen. In 2004, the total electronic trade value was 4400 million Yuan, which was an increase of 47% compared with 2003. The figure increased sharply to 6000 million in 2005.4 Xiaoping Song, the head office of the China Electronic Commerce Association, indicated that the development of electronic commerce in China will come within a booming era.

5 This paragraph below shows the development of e-commerce trade value in China from 2001 to 2006. The unit each year is a hundred million Chinese Yuan. Although the development of electronic commerce has been both rapid and dramatic, it makes an ongoing process in taxation even more evident. It challenges both tax authorities and taxpayers throughout the world. How to maximize the potential efficiency gains of the Internet and protect the revenue base without hindering the development of new technologies are challenges for tax authorities.

Tax bases are becoming more and more mobile.6 As to the issue of China, it is vital for the Chinese government to make more effort for the protection and development of this sun-rise industry.