E-Marketing of Hong Kong, Malaysia and Australia - Research Paper Example

Taxation Table of Contents Introduction 2 Malaysia and Australia 3 Hong Kong 7 OECD’s Views and Observations 8 Conclusion 9 References 10 Introduction Electronic commerce or E-Commerce can be literary defined as “the ability to perform transactions involving the exchange of goods or services between two or more parties using electronic tools and techniques.” It literary facilitates purchasing and selling of goods through the internet. Payments are made through debit cards and credit cards. To develop the market share it is used and also it relates to e-business. Payment and delivery are done through internet. There are two types of delivery process through internet, i.e. one is mail process or courier and the second is online process, e.g. Wee Lee of Kuala Lumpur ordered for an accounting software latest version through internet. The payment as well as the delivery is done through online process, so no other entities are involved in this process like customs department and the courier company. But another customer Lia Yoe of Kuala Lumpur also ordered the same and wants delivery by courier. In that case, Lis Yoe will be charged import duty by the tax authority of Malaysia and Wee Lee will not charged any tax for time being. Malaysia and Australia In e-commerce, there would be no direct contact with any customer relationship, or any employees, or the seller. Therefore, the Permanent Establishment (PE) becomes less clear. There some other examples which destroy the tax like computer software, stock trading and magazines, photographs and also books. E-commerce in Malaysia when compared to Australia, the amount of development of e-commerce is low. Table 1- E-commerce Transactions (US$) Countries 1998 1999 2000 Malaysia (a) 18.01 million 58.89 million 164.15 million Australia (b) 123.2 million 180.6 million 1.2 billion Source: (a) Australian Bureau of statistics, Household use of Information Technology Report, 1998 Table 2 states the income collected by the Malaysian companies a projected the loss of tax from 1997 to 2004. It is seen that development of E-commerce in Malaysia is getting larger at every year. In Table 2, it is shown in the year 2003, Malaysia make a loss around US$98.16 million or RM392.62 million in tax collection. In 2004, it increases about 68% or RM 659.27 million. Table 2- E-commerce Revenue and Tax Loss Projection in Malaysia from 1997-2004 Year Revenue Tax Loss Projection** Loss Increment 1997 6.31 0.32 185% 1998 18.01 0.86 227% 1999 58.89 2.80 179% 2000 * 164.15 7.80 260% 2001* 426.72 20.26 133% 2002* 993.68 47.20 108% 2003* 2066.40 98.16 68% 2004* 3469.85 164.82 *- Projections ** Based on assumption 5% tax rate (Talha, n.d.). “Scope of Charge” is a limit of tax to an income in a specific country. Now, Malaysia practices scope of charge in ‘derive and remittance’. It states that all revenue derives in Malaysia and that revenue derives out of Malaysia but remitted to Malaysia is subjected to Malaysian Tax. This is only applicable to residence. According to Kasipillai and Razak and Ming, the scope of charge is not capable to cope with information Technology mainly in e-commerce. By utilising the scope of charge will raise the tax dodging among the one who uses e-commerce as the administrator of Tax cannot locate the e-commerce doers. The prime attribute of e-commerce is undeclared transaction and ‘ghost’ doers. Residential status gives some privileges like the progressed tax rate, personal support and with other incentives. Residential status cannot be identified in the transaction of e-commerce. So, the tax administrator cannot impose tax on the doers as they cannot trace them properly. In Table 3, it is shown that the academic qualification of the accuser. About 90.1% academicians are post graduates and about 52.4% are tax practioners having professional qualification. In Table 4, it is seen the experience length in tax environment. Among the academicians, most of them have more than 5 years experience but only 28 practioners had the experience. In Table 5, it is shown that 63 of the accused noticed that the e-commerce created tax loophole mainly in Malaysia’s scope of charge. Table 3- Academic Qualification Qualification Academicians Tax Practitioners Ph.D 7 0 Masters 13 8 Professional 2 43 Bachelor 0 18 Diploma 0 9 Other 0 4 Total 22 82 Table 4- Experience in Tax Environment Duration Academicians Tax Practitioners >10 Years 4 13 8 -10 Years 3 3 5 -7 Years 6 12 2 -4 Years 7 27 Read More