Global E-commerce Marketplaces and Consequent Challenges to Indirect Taxation

The digital economy poses challenges for collection of Value Added Tax(VAT)/Goods and Services Tax(GST), jointly as VAT, particularly when goods, services and intangibles are acquired by private consumers from suppliers abroad. Currently, most jurisdictions exempt import of low-value goods because the cost of collecting VAT on this may exceed the actual revenue. As this could have been perceived as a sound tax policy when digital economy was still in its infancy, it may no longer be a reasonable solution in light of dramatic volume and value rise of purchase online, and particular cross-border flow of goods. Recent international discussions have focused on the roles of the e-commerce marketplaces(digital platforms) that can play in the collection of VAT from transactions they facilitate in their capacity as "digital intermediaries". The development of the OECD tax framework, in particular the European Union(EU), could offer valuable inspiration for jurisdictions in other regional blocks or initiatives, such as Belt and Road Initiative(BRI), wishing in future to implement mechanisms engaging digital platforms in VAT collection. Based on the current experience, any such mechanism should be consistent with the requisite principles of the sustainable tax regime, namely rule of law in taxation and tax certainty.