Contact: David Holmes, Tel: +33 (0) ; Fax: +33 (0)

For Official Use DAFFE/CFA(2003)43/ANN5 DAFFE/CFA(2003)43/ANN5 For Official Use Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 12-Jun-2003 English - Or. English DIRECTORATE FOR FINANCIAL, FISCAL AND ENTERPRISE AFFAIRS COMMITTEE ON FISCAL AFFAIRS REPORT ON AUTOMATING CONSUMPTION TAX COLLECTION MECHANISMS 1-2 July 2003 OECD Headquarters, Paris This document is presented to Delegates to the Committee on Fiscal Affairs, for information, at their meeting of 1st and 2nd July 2003. English - Or. English Contact: David Holmes, Tel: +33 (0)1 45 24 95 91; Fax: +33 (0)1 44 30 61 36 E-mail: David.Holmes@oecd.org JT00145988 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format

SECTION I: BACKGROUND Ottawa Taxation Framework Conditions and the post-ottawa agenda 1. The work programme of the Committee of Fiscal Affairs regarding electronic commerce is based on the 1998 Ottawa Taxation Framework Conditions, which held, inter alia, that rules for the consumption taxation of cross-border trade should result in taxation in the jurisdiction where consumption takes place. 2. Under most consumption taxes, (VAT, GST and retail sales taxes), significant compliance obligations attach to the vendor, particularly for business to consumer (B2C) transactions. Even if the tax charge ultimately falls on final consumers, they are usually not responsible for remitting the tax. As jurisdictions adopt the Ottawa Taxation Framework Conditions for consumption taxes, and as cross border trade increases, jurisdictions are increasingly likely to impose on vendors a duty to collect consumption tax on sales in jurisdictions where they have no physical presence. This carries increased tax compliance exposure for remote sellers, particularly for the calculation, collection, remittance and reporting obligations of tax on B2C supplies. 3. In the OECD s 2001 report Taxation and Electronic Commerce: Implementing the Ottawa Taxation Framework Conditions it was noted that since Ottawa there had been significant discussion of technology-based solutions for the collection of consumption tax for cross border B2C transactions. 4. It was recognised that a technology-based/technology-facilitated approach to consumption tax collection is desirable in these circumstances. Consequently, the report recommended that further work, commencing early in 2001, should be undertaken to evaluate the potential and relative feasibility, of technology-based and/or technology-facilitated collection mechanisms, as part of overall tax compliance strategies. Current Work Programme 5. The Working Party No. 9 (WP9) work plan for 2001-3 recognised the role of technology in tax collection mechanisms and also that new technology was increasingly likely to emerge. It identified four main areas that needed to be examined. The tasks for Task Team 4 of the WP9 Subgroup on Electronic Commerce were: To research and develop a framework within which developers may build systems that facilitate electronic tax collection mechanisms; To evaluate technological tax collection mechanisms against a range of criteria such as feasibility, timeframes, standards and cost; 2

To evaluate how Trusted Third Parties (or other similar intermediaries) could efficiently support tax collection mechanisms, analysing their role and responsibilities and the costs; Assess how such mechanisms may provide simplification for tax collection in relation to a larger set of transactions (i.e. scaled up to include certain types of transactions in goods). 6. The work plan of Project Team E of the Consumption Tax TAG was broadly similar and it seemed sensible that the two teams should work together, eventually arriving at a joint report. 7. The common aim was to identify the environment in which the appropriate technology could develop, rather than to identify one or more solutions. SECTION II: A FRAMEWORK FOR AUTOMATED COLLECTION OF CONSUMPTION TAXES Technology Used Today for Consumption Tax Collection 8. The correct charging, collecting, remittance and reporting obligations of consumption taxes, such as VAT, GST and retail sales taxes, are traditionally the responsibility of vendors. Thus business has developed a number of operating and administrative systems over the years to support these responsibilities and these are increasingly automated. Calculation: Tax calculation software has been around for many years and can deal effectively with multiple rates as long as the necessary data elements are available. Subject to the same caveat, it will also function comfortably in a multi-jurisdictional environment. Collection: The actual collection of tax by vendors from customers is also capable of automation, for both traditional and electronic commerce. Whether payment is by credit card or other means, adding the tax charge (once calculated) to the amount to be collected for an on-line transaction is generally a problem free process. Remittance and returns: Remittance of tax collected is a relatively straightforward process. It is capable of automation and some tax administrations require automated remittance in certain circumstances. Submitting returns is still often accomplished by completion of hard copy returns 3

but there is an increasing trend towards using on-line returns 1. On-line returns are becoming more of a feature but probably represent the least automated stage in the overall compliance process. Feasibility of Extending Technology to Facilitate Cross-border B2C E-commerce 9. Recognising that many of the key elements in the overall taxing process are already automated, the challenge was to see whether or not these individual elements could be brought together to form an integrated automated process in multiple jurisdictions. Thus the first task of the team was to ascertain the technological feasibility of incorporating automated procedures for tax collection processes into e-commerce transactions. If this was not feasible, or involved prohibitive cost, there would be little benefit in pursuing further work. 10. As indicated above, tax calculation software capable of computing tax for multiple jurisdictions is not new. A working example can be found in the way companies handle the EU's distance selling regime. This requires collection of VAT on goods sold to non-business customers in other EU Member States, usually predicated on the nature of the product and the delivery address. Similar processes, in certain circumstances, are used to collect retail sales taxes in the United States. Again, as noted above many jurisdictions now provide for electronic filing of returns with electronic payment although this is probably the least automated aspect of compliance. In some cases, however, it may be mandatory and include direct on-line access to government programmes and systems. 11. The Streamlined Sales Tax Project 2 (SSTP) in the United States has investigated the extent to which technology could be leveraged to facilitate cross-border collection, across multiple jurisdictions, thereby removing one of the main burdens that was blocking the ability to enforce collection. Whilst there are significant differences between the states sales and use tax system, and the collection of international cross-border consumption taxes on electronic commerce transactions under the Ottawa Framework Conditions, there are also similarities. The common challenge faced is that of a customer in one jurisdiction buying from a vendor in another with no clear enforceable process to ensure that the tax ends up with the jurisdiction of consumption. Considerable time was spent analysing the models being developed under the SSTP (see Section III). 1 A recent survey of OECD countries established that most have moved, or are moving, to on-line reporting of VAT/GST. 2 For many years there have been concerns about the operation of the states' Sales and Use Tax in the United States, particularly with respect to interstate mail-order sales. These concerns, shared by both tax administrators and some businesses, were based on the federal constitutional restraints on the states ability to collect taxes on interstate transactions when the remote vendor lacked a physical presence in the state. The U.S. Supreme Court had articulated these restraints on the ground that requiring a physically remote vendor to comply with the complexity and multiplicity of state and local taxes on mail-order sales to local consumers would impose an unreasonable burden on interstate commerce. These restraints led to what some have identified as a significant competitive distortion as well as lost revenue. It was against this background that the states formed the Streamlined Sales Tax Project. 4

12. With respect to the SSTP s work the focus was on the feasibility of the technology, but it was also noted that significant streamlining (e.g. classification of goods, remittance procedures, returns, harmonisation of tax rates, etc.) was necessary. Without this streamlining it was irrelevant whether the technology would be feasible as the costs of building the systems would be prohibitive. In the review of the models the SSTP was incorporating into its project, it was shown that purchases could be made, tax calculated and collected and reported for subsequent remittance to the correct tax jurisdiction by automated direct debit from the intermediary or vendor s bank account. Notwithstanding that this demonstration was provided in the early stages of a pilot project it showed that an end-to-end technological system is feasible in the right circumstances. Wider scale implementation should be monitored, as guidance rather than a model. Consumption Tax TAG Concerns 13. Whilst the technology that automates the aforementioned elements is readily available, there remain several issues regarding the use of technology for tax compliance procedures related to multi-jurisdictional cross border B2C transactions. These concerns are set out in Box 1 and were also evident from the study of the SSTP. Box 1 Complexity of Current Consumption Tax Systems: By its very nature electronic commerce depends on speed of response and simplicity of operation. The diversity between consumption tax systems adds to the complexity of the decision making processes of technology. The higher the number of potential decisions to be made, the more costly and difficult it will be to automate them. Cost: Cost is always a key driver in business decisions. Outsourcing specialist functions to third parties is an established way to control costs. The economic case for such a decision bears a direct relationship to cost and complexity. Administrative Requirements: If tax administrations impose significant burdens on vendors within the record-keeping, remitting and reporting stages, the automation of processes becomes expensive and complex. Taxing jurisdictions need to take the opportunity to modernise taxation systems to create an environment in which technology can play a greater role in tax collection. Creating an Environment for Advanced Technology to Work 14. Technical feasibility is only part of the picture. As Box 1 shows, complexity, cost and administrative (including legal) considerations must also be addressed to create an environment in which such technology could operate effectively. Complexity 15. As noted earlier, some business and government members regard the complexity of current consumption tax systems as a barrier to the successful use of technology for the collection of consumption taxes on cross border B2C transactions. Appropriate simplification and where necessary co-ordination between tax administrations of tax policies and compliance procedures would enable taxpayers and administrations to automate more steps within the tax collection and compliance process. To the extent that rules could be streamlined, the role of technology could be developed further. Clear and well-communicated tax policies will benefit the development of 5

technology as ambiguity cannot be automated. This would include such things as providing information on tax rates and product classification policies on-line. Cost 16. Whilst technology is a very useful tool in automating complex processes, it is equally true that the greater the complexity the greater the cost. Streamlining of consumption tax processes will allow cost-effective, market-driven technological tools to develop, facilitating compliance across jurisdictions. 17. The costs of the technology that will be used in the Streamlined Sales Tax Project in the United States will, in certain circumstances, be compensated by the states. This is not an established practice for many national governments 3 and the question was not pursued in preparing this paper. Therefore the participation of tax administrations in development and operational costs needs to be examined further. Administrative and Legal 18. Barriers exist not only in existing tax legislation and regulations but also in non-tax legislation and administrative practices. For example, where remote sellers choose to outsource their tax obligations, the acceptance of a trusted third party as a 'tax agent' within some jurisdictions will require changes to non-tax legislation or, in some cases relaxing the legal restrictions on who is legally entitled to perform certain administrative obligations. The impact of a potential shift, if any, in the underlying legal liability is also a factor. 19. The key message is greater consistency in certain aspects of legislation between countries in order to allow technology to flourish. Unnecessary burdens will only add to non-compliance. 20. Barriers in the current environment stem largely from the fact that existing national tax regimes focus on traditional business models (usually established businesses). For taxing jurisdictions seeking to impose collection obligations on remote sellers, maintaining traditional tax compliance procedures may pose a barrier to creating an environment in which technological tax collection tools can develop. 21. For example, if taxing jurisdictions adopted simplified registration and reporting requirements for non-resident sellers, as advocated in the Consumption Tax Technical Advisory Group 2001 Report, this would make it easier to apply technological solutions. Any measures to simplify the compliance requirements for non-resident sellers should include a realistic level of compatible administrative processes across jurisdictions. The acceptance of electronic records and the streamlining of audit practices are other examples of administrative simplifications that would benefit the development of technological tools. Even a relatively straightforward measure such as 3 Note, however, that some governments have provided rebates to compensate business for capital costs related to the implementation of VAT/GST systems. 6

making available on-line VAT /GST numbers would assist technological tools in making taxing decisions and to meet documentary evidence requirements 4. Achieving a Framework that Encourages Market Driven Solutions 22. Technology exists today that automates many aspects of charging, collecting, remittance, and reporting of consumption taxes under existing tax regimes. Technology is and always will be an effective tool in the administration of consumption taxes. 23. If appropriate legal and administrative modifications and simplifications are made to allow technology to operate effectively, such technology can provide the foundation for a substantially automated tax collection mechanism for consumption taxes. An environment that will allow technology to deliver effectively at an international level can best be achieved by streamlining and simplifying tax processes, both administrative and operational. 24. The use of technology for declaration, remittance and registration processes, the co-ordination of administrative requirements, technical standards, and audit standards, and the removal of barriers that prevent intermediaries acting on behalf of vendors, would support this aim. SECTION III: EVALUATION OF TECHNOLOGY BASED COLLECTION OPTIONS 25. The work on technological tax collection mechanisms began with the study of five options: 1) Self assessment/reverse charge 2) Tax at source and transfer 3) In-house software 4) Intermediaries 5) Global registration body 26. In the 2001 Report released by Working Party 9 5, two of the options were not considered appropriate. The first option, self assessment /reverse charge, has not proved to be an effective tool in ensuring the collection of tax on transactions involving private recipients. The second option, tax at source and transfer, raised feasibility issues due to its expected significant cost of 4 For further discussion of this issue refer to the Consumption Tax Guidance Series paper Verification of Customer Status and Jurisdiction 5 See Taxation and Electronic Commerce: Implementing the Ottawa Taxation Framework Conditions, OECD 2001. 7

administration and the need for multi-national agreements regarding enforcement, collection and revenue options. Further work was not conducted by the team on these two options. 27. To understand better the workings of existing automated tax calculation, collection, remittance and reporting systems, the remaining options were examined against a framework of legal, administrative and political challenges. In-house software: 28. Unless off-the-shelf packages become widely available, full end-to-end systems (i.e. from charging through to remittance and reporting to the correct tax administration) that require sophisticated operational software will be expensive alternatives. Such systems are likely to appeal to large companies where an investment of this magnitude would be cost-effective. 29. In-house software would most likely operate within a vendor registration model. The company would make its reporting and payments electronically and would be subject to audit (presumably electronic) in the normal way. 30. As with any automated tax system, such a process needs timely access to updated tax information, rate changes and legal requirements from tax administrations to enable a business to comply with its obligations. 31. In the longer term, consideration might be given to some form of multi-jurisdictional certification for such systems that would provide, within agreed parameters, a measure of reduced audit or even freedom from penalties in the event of system (rather than operational) failure. Business representatives on the Technical Advisory Group stress that the absence of such assurances might be a limiting factor. Intermediaries 32. The use of intermediaries in remitting consumption tax from a non-resident vendor is not new, and there seems little doubt that, for international e-commerce, third parties can perform a role in assisting both business and taxing authorities. There may, however, be significant costs involved, not least when some jurisdictions require security or assumption of liability from the parties involved before an intermediary can act. There may be barriers to be removed and ultimately the decision to use an intermediary should be business-driven. 33. Intermediaries provide support to businesses of all types and sizes and their role should not be restricted unnecessarily. In the context of e-commerce it is likely that the use of intermediaries would be attractive to smaller businesses or those large businesses that cannot justify the costs of the in-house systems as noted above. Smaller businesses in particular would find it a major challenge to acquire a working knowledge of consumption tax rates and rules across all jurisdictions. Therefore many businesses would benefit from an outsourced service to assist them in charging and accounting for the correct amount of tax on transactions. 34. This partial (or even full) outsourcing of tax obligations is not new and it may well provide the key to encouraging compliance. Jurisdictions have traditionally required the registration of vendors as a means of ensuring that they have knowledge of the taxpayer. A suitable intermediary 8

may be best placed to handle registration and compliance for a business across multiple jurisdictions. Allowing this to evolve as a self-sustaining economic activity may contribute significantly to achieving compliance. 35. For the foreseeable future however, outsourcing or third-party models can only realistically be seen in the context of the existing registration based systems. In the longer term it may be conceivable that the role of the third party may develop to an extent that other options could be explored. Given however that under VAT/GST type taxes, the seller is usually held to be the taxable person and is accordingly liable for the tax, any change in this underlying premise raises some fundamental issues. Further consideration is given to the roles and responsibilities of intermediaries in Section IV. Global Registration Model 36. This model is based on the execution of a multilateral agreement between countries that would create one central global registration body, and provide for local government responsibility in the establishment of one or more trusted third parties ( TTP ) in each country (this function may be retained by the government or outsourced ). Vendors around the world would register in their local tax jurisdiction, which, in turn, would provide limited registration information about the vendor to the global registration body who, in conjunction with the TTPs, would handle the administrative procedures associated with tax collection and distribution. 37. Consideration was given to this model but it was felt that, for the time being, effective application would require a level of international co-operation that would be difficult to achieve, except perhaps in the very long term. There are however attractive elements in it and it should not be discarded, but rather reviewed from time to time. Other Models 38. In the longer term, it is possible that other models might emerge an example might be vendor liability linked to collection by a service provider. For the immediate future the conclusion is that a vendor liability model seems the only workable solution. In the future, alternative models, no matter how unlikely they presently appear, should not be readily discarded. As such, all options should be kept under review. 9

SECTION IV: EVALUATION OF THE ROLES AND RESPONSIBILITIES OF TRUSTED THIRD PARTIES 39. The teams were tasked with the evaluation of how Trusted Third Parties 6 (TTP) (or other similar intermediaries) could efficiently support tax collection mechanisms. This builds on the work of the Technology Technical Advisory Group (as documented in the Report by the Technology Technical Advisory Group, December 2000) and their description of how a TTP collection model might work. It also further develops the evaluation of intermediaries in Section III of this report. 40. As a first step, the roles and responsibilities of vendors concerning the charging, collection, remittance and reporting of consumption taxes were identified. A high-level summary of these is listed in the Box 2. Vendor responsibilities to the customer Box 2 Display prices inclusive/exclusive of consumption tax Charge correct amount of consumption tax on taxable products (this would include the proper classification of supplies, the correct tax rate, verification of the customer s jurisdiction and status) Calculate and issue refund of taxes associated with post transaction adjustments (i.e. issue credit/debit notes inclusive/exclusive of consumption tax) Provide a tax invoice that contains the information to allow the recipient to claim an input tax credit, where necessary Vendor responsibilities to the revenue authority Register for consumption tax (i.e. obtain a GST/VAT/Business Number) Charge correct amount of consumption tax on taxable products File GST/VAT returns Remit consumption tax Record keeping 6 Page 17 of the Report by the Technology Technical Advisory Group, December 2000, provided the following definition of Trusted Third Party: A Trusted Third Party (TTP) is a generic term, which could refer to any organisation that is performing a task for vendors, consumers or governments. A TTP could take the form of a financial institution, a fulfilment and distribution system provider, or an independent clearinghouse. 10

41. TTPs could provide support for the vendor responsibilities noted above. For example, The TTP could be responsible for the correct calculation of the tax. This would include product classification, monitoring legislative or tax rate changes, and verification of jurisdiction of the customer. Tax invoices and credit/debit notes could become the responsibility of the TTP. The TTP could be responsible for the collection of tax. The TTP could be assigned the responsibility of remitting the tax to the relevant tax authority. The TTP could be required to be registered with the revenue authority. The TTP could be responsible for the filing of GST/VAT returns. When a vendor uses a TTP to collect and remit tax on their behalf, additional record keeping requirements could arise as records must contain sufficient information to allow transaction records to be examined by a revenue authority. 42. If a TTP assumes the responsibility for any of the vendor tax compliance obligations and if the TTP is held to be liable for such obligations then the fees charged by the TTP will be higher, reflecting the risk element. On the other hand, an intermediary could perform the tasks associated with the above responsibilities as a service provider under the direction of the vendor. In the latter case the fees charged by the intermediary would be lower because the vendor would retain financial and legal liability associated with its tax compliance obligations. These alternatives can be viewed as different ends of a spectrum and it is likely that other arrangements may exist in between. Where a particular arrangement lies will be determined by the terms of the contract between the vendor and the intermediary. In addition relevant local laws may also have an impact on the determination of who bears a specific level of liability for each tax compliance function. In most cases the cost of an outsourcing arrangement is reduced where liabilities are not jointly borne (i.e. they are not borne twice). 43. In order to understand more fully how a TTP collection option could work, the team studied the Streamlined Sales Tax Project that is currently under development in the United States. This Project originated from the desire to simplify and modernise sales and use tax collection and administration in the United States (see footnote 2 in Section II). 44. One of the components of the Streamlined Sales Tax Project is the use of technology to reduce the burden of tax collection for vendors. The Project provides that sellers may choose one of three technology models, including what is referred to as a Certified Service Provider, which will perform all of the vendor s sales tax functions 7. This model, which could be considered a Trusted Third Party arrangement, was demonstrated by a Certified Service Provider to both the Subgroup and the CT TAG using live data. Tax was charged, collected, and accounted for by the Provider. 7 Alternatively a seller may use a Certified Automated System to perform only the tax calculation function or a larger seller with nationwide sales that has developed its own proprietary sales tax software may have its own system certified by the states collectively. Streamlined Sales Tax Project, Executive Summary, March 2003 available at www.streamlinedsalestax.org. 11

The team was reasonably satisfied that the technology that would allow a TTP to perform the vendor s sales tax function works, in its current pilot project form. 45. However other very important components of the Streamlined Sales Tax Project include tax law simplifications and more efficient administrative procedures. Under the Streamlined Sales and Use Tax Agreement participating states must agree to use common definitions for items in the tax base, to reduce the number of tax rates used at the state level and local level, and to develop uniform place of taxation rules. In addition, they must agree to simplified tax returns, a simplified method for tax remittances, and a central electronic registration system for all member states. Further they must agree to a limited (or even zero) audit of vendors who participate in the technology models under the Streamlined Sales Tax Project. 8 46. The Streamlined Sales Tax Project is best described as a package - only one component of which is the use of technology. Formal agreements are required between the participating states, the TTP and the vendors and radical simplifications of the current sales and use tax systems are required. 47. Some of the issues for the Streamlined Sales Tax Project, such as simplification of classifications and tax rates for physical goods, may have less relevance to cross-border supplies of digitised products. However, issues such as multi-national agreements and simplified, compatible, administrative approaches do have implications that would need more work in terms of scaling this model up to the international level. The lesson learned from all this supports the views expressed in Section II that whilst technology can provide for facilitation of cross-border compliance, governments have a key role to play in creating the environment within which technology can fulfil its promise in supporting compliance. SECTION V: CONCLUSIONS 48. While technology to support automation of consumption tax compliance for cross-border business-to-consumer e-commerce is feasible, it is evolving and its mere existence does not mean that there is automatically a technological solution. 49. To achieve the goal of allowing technology to facilitate collecting consumption tax on multijurisdictional cross border e-commerce, tax administrations need to consider the steps towards creating a legal and administrative environment which can enable the business sector to develop its own solutions. What follows is, in effect, an evaluation of the key elements that must be addressed in order to allow for a move from technological feasibility to business implementation. 8 Streamlined Sales Tax Project, Executive Summary, March 2003 available at www.streamlinedsalestax.org. 12

50. No one particular model will suit all businesses. The different models studied are not mutually exclusive and may have features that can be combined. Whilst the global registration body model contains attractive elements, such as reduced obligations for vendor registration, the effective application of the global model would require a level of international co-operation that would be difficult to achieve, except perhaps in the very long term. In the short to medium term the following deserve further consideration: In-house software; and Intermediaries; or some combination of the two. 51. Further, there are benefits in allowing a flexible approach rather than picking a particular model. 52. Allowing a range of business driven solutions to emerge is the best way to ensure compatibility with commercial business systems and allowing business, wherever possible, to work though their existing internal processes. In this way, technology will give cost effective solutions. 53. Technology comes at a price. While automating complexity is possible, the more complex the system the more costly it is to automate. For the SSTP in the United States it was evident that the variety in tax rates, classification and other administrative variables had to be streamlined if technology could deliver at a reasonable cost. Ambiguity on the other hand cannot be automated. 54. There are opportunities to modernise existing consumption tax regimes so as to create an environment in which technology can better play a role in the compliance process. But there are barriers in the current environment which to some extent stem from the complexity of existing national tax regimes 55. An environment that will allow technology to deliver effectively at an international level can only be achieved by streamlining and simplifying tax processes, both administrative and operational. The following steps would support this aim: Use of technology to enable non-resident suppliers to register, declare and remit tax in multiple jurisdictions. Compatible technical standards and administrative requirements across jurisdictions. Removal of barriers that prevent intermediaries acting on behalf of vendors. Electronic availability of consumption tax information such as rates. Simplified on-line registration for non-resident vendors. Simplified electronic returns and electronic payment. 13

Removal of any residual barriers to electronic record keeping and storage. Common audit standards for electronic records of non-resident vendors. SECTION VI: TAKING THE WORK FORWARD 56. Both Working Party 9 s Sub-group on electronic commerce and the Consumption Tax TAG worked together to consider technological advances and look at the relative feasibility of known models. 57. This process led to an enhanced understanding of the interests of stakeholders, as well as the practical issues associated with integrated or certified software and with full or partial outsourcing of functions to third parties in multiple jurisdictions. This required consideration of the legal, administrative and other factors which might impact on progress. 58. The conclusion of participants was that there remain areas requiring further investigation for the greater facilitation of compliance. These include: The legal implications in the use of intermediaries: There are benefits in creating an environment where intermediaries can operate effectively but nevertheless barriers exist. As cross border e-commerce evolves, it is desirable that businesses and tax administrations continue to work on identifying barriers and how they should be addressed. Consideration needs to be given to the issue of whether intermediaries need to be certified or licensed or whether the objective should be simply to remove restrictions. Certification of software: The work done under this heading was limited and further analysis is needed. The number of practical applications is limited and in a multijurisdictional environment a high degree of harmonisation would be needed. Software that is certified by one national tax administration for use within its own tax system brings limited added value to resolving multi jurisdictional compliance problems. Costs of implementing technology: In establishing the benefits in using intermediaries and in-house software in this field, there is a need for further work to identify where costs arise; who might be responsible for them and how to minimise the costs to both government and business. Further, the focus of the work to date has been on facilitating cross-border compliance for the delivery of business-to-consumer e-commerce supplies. Should such technology also have potential for application in a wider set of transactions then costs could well be reduced on the basis of economies of scale. This needs further enquiry and would almost certainly require co-ordination with organisations such as the World Customs Organisation. 14

Remote auditing: On-line remote auditing requires further evaluation in terms of system interface, accessibility and standards. There are legal, economic and political factors to consider. Similarly, the impact on both business and revenue authorities needs to be understood and analysed more fully. The work of the Forum on Tax Administration may be capable of being incorporated for businesses and intermediaries to understand the scope of national requirements. Environment: The work done to date has clearly demonstrated that in order to allow market driven technological solutions to flourish, jurisdictions must work to achieve greater consistency between certain aspects of legislation. The work of Project Team D may be of assistance in identifying such areas for further consideration. 15

Monitoring: Useful guidance and experiences in the practicalities of ensuring that businesses meet their obligations could be gained from an examination of the implementation by member countries of the Recommended Approaches to the Practical Application of the Guidelines on the Definition of the Place of Consumption as published in the 2001 Report. 16