Finance Articles

Electronic Commerce Taxation: Emerging Legal Issues - Part III

ADMISSION AND VERIFICATION OF IDENTITY IN ELECTRONIC RECORDS

Verification of identity is also a problem for consumers, who want to be assured that the persons with whom they do business are who they claim to be . As a result, companies engaged in electronic commerce are developing "digital certificates" or "digital IDs" that can be used to verify a person's identity over the Internet. "Digital certificates" are issued by a trusted intermediary who verifies the identity of a person and performs appropriate background checks, depending on the level of assurance to be granted. The simplest level verifies that an e-mail message was sent from an indicated address. The next level verifies the digital ID holder through online identity verification against a consumer database. The highest level requires that the holder personally appear before a notary public to have a digital ID application notarized. Once a person's identity has been verified, the certificate is created using public key encryption techniques, which makes it independently verifiable by the recipient and Immune from tampering it.

Under clause (a), (b) (c) (d) subsection 2 of section 114 of Income tax Ordinance 2001 has make it obligatory on every person and company regarding providing evidence of the records, "... A return of income (a) shall be in the prescribed form; (b) shall state the information required by the form, including a declaration of the records kept by the taxpayer; (c) in the case of a person carrying on a business, shall include an income statement, balance sheet, and any other document as may be prescribed for the tax year; and (d) shall be signed by the person or the person's representative."

The validation of the details of any business transaction requires an ability to follow a similar audit trail as that which exists for conventional commerce. The following elements must therefore be present- access to the basic records related to a transaction must be available; and the integrity of those records must be authenticated. Taxpayers are required to keep accurate books and records, which are subject to examination by the income tax authorities in order to verify the income and expenses reported on the taxpayer's return. "... Although many taxpayers rely on computerized record keeping systems to a large extent, many transactions still originate as paper records which can be used to verify the accuracy of the electronic records. However, for taxpayers engaged in the sale of electronic goods or services, no paper records are likely to be created because customer orders are placed and fulfilled electronically and therefore the only record that exists of these transactions could be an electronic one. As all users of computers know, this creates the possibility for tax evasion and fraud because computerized records can be altered without a trace."

The "digital notarization" systems have been developed which are intended to make it possible to verify that electronic documents and records have not been altered. Public key encryption also permits a taxpayer to encrypt his financial records to prevent their examination on audit. It would seem that this should be treated no differently from failing to keep or destroying paper records. Even taxpayers engaged in the sale of physical, as opposed to electronic, goods may soon receive orders and issue invoices electronically. Electronic "documents" must be verifiable in order to minimize the potential for tax evasion.

THE CONCEALMENT OF THE ELECTRONC TRANSACTION LEGAL ISSUES FOR TAXATING AUTHORITIES

These are many factors which can lead to evasion the collection of the e-commerce taxation. The section starting from 108 to 112 has enunciated in income tax ordinance of 2001 are related with the anti avoidance measure that could be adopted by the commissioner for the purposes avoidance of the taxes. In spite of fact that the anti avoidance provisions are available for curbing the avoidance of the taxes but the legislate provision are not sufficient to meet the complexities of e-commerce transaction owning to following factors.

Thus far we have examined the Internet's impact on existing taxation frameworks on the assumption that any transactions conducted over the Internet would be to some degree either self-reported or within the investigative and enforcement powers of revenue authorities. This however is not always the case. In fact, the special characteristics of the Internet, i.e. its lack of central control, combined with its international reach make it very difficult, if not impossible, to regulate the vast amounts of money that are expected to travel through it. The Internet is used for tax avoidance and other criminal shifting of income.

The web server could be located any where, irrespective of fact that transaction has been taken place, the remote web server location provide easy room for the concealment of the identity of the transaction.

There is very ineffective construction of section 108 of income tax ordinance regarding the question of transaction which has realised in an arm's length transaction."... The Commissioner may, in respect of any transaction between persons who are associates, distribute, apportion or allocate income, deductions or tax credits between the persons as is necessary to reflect the income that the persons would have realised in an arm's length transaction."

The strict construction statute with intrinsic aid of appropriate phrases conveys exact meanings that can lead to exact interpretation of statute according to intention of legislatures. The transaction has been conducted by e-commerce means requires substitution of texts which could embody the scientific mechanism into statutory provisions.

The Sub-section 3 of section 111 of the income tax Ordinance related with the anti avoidance policy, the authority has been vested on the commissioner to question the satisfactory account of the expenditure of the account of other resources. "... and the person offers no explanation about the nature and source of the amount credited or the investment, money, valuable article, or funds from which the expenditure was made or the explanation offered by the person is not, in the Commissioner's opinion, satisfactory, the amount credited, value of the investment, money, value of the article, or amount of expenditure shall be included in the person's income chargeable to tax under head "Income from [Other Sources"] to the extent it is not adequately explained."

Hiding Identification of the parties to a transaction, in particular the taxpayer The taxpayer can hide the identity of parties by tampering the database the website, where it has been uploaded.

Where the declared value of any investment, valuable article or expenditure of a person is less than the cost of the investment or valuable article, or the amount of the expenditure, the Commissioner may, having regard to all the circumstances, include the difference in the person's income chargeable to tax under the head "Income from [Other Sources"] in the tax year in which the difference is discovered

The deletion of the database is possible within fraction of the moment, which could provide enough opportunity for the tax payer to tamper with the record of the transaction in remote server and evade imposition of taxation.

CYBER BANKING

Look here the power has been restricted under the section 94 of C of Cr.P.C. (Act V of 1898) for getting access to banking records, "... Provided that no such officer shall issue any order requiring the production of any document or other thing which is in the custody of bank or banker as defined in Banker' Evidence Act, 1891(XVII of 1891), and relates or might disclose any information which relates to the bank account of any person except... "

The first and lesser problem relating to the regulation of Internet commerce for tax purposes is the uncertainty of whether current laws will even apply to financial transfers on the Internet. By requiring very specific documentation of every transaction the government can attempt to extend the regulations that apply to paper based banking into "cyber banking". Nevertheless, it appears that this legislation will primarily be targeted at technology such as automatic teller machines and wire transfers, but will not contemplate newer banking applications such as the Internet. For example, the requirements that consumers receive receipts and periodic statements reflecting electronic transfers of money do not make sense when applied to stored-value cards that operate independently of a bank account. Stored value cards will likely replace cash to a significant degree as we move towards an increasingly paperless society.

The writer is an advocate of High Court and practicing immigration and corporate laws in Pakistan since September 2001. He is a self employed and pioneer in research on electronic commerce taxation in Pakistan. His articles were published widely in the critical areas of cyber crimes, electronic commerce, e-taxation and various other topics. He wrote LL.M thesis on titled "Legislation of electronic commerce taxation in Pakistan" in which he provided comprehensive legal proposals for statutory reconstruction of tax laws for purpose of imposition of taxation on e-business in Pakistan. Currently he is conducting is research on topic 'Electronic commerce taxation: emerging legal issues of digital evidence'.

Author can be contacted by Adil Law Company (Advocates and Immigration lawyers) Office No.3 2nd Flr Hafeez Chambers 85 The Mall Rd Lahore Pakistan Telephone: +9242-6306195 +9242- 6360108 Fax: + 9242 6360108 Cell: +92300 4254910 E-mail: adil.waseem@lawyer.com

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

How do commercial debt reduction companies work & Locating a Bad Credit Mortgage?
Dont stress it  commercial debt reduction companies are proven authorities in debt negotiation to reduce your commercial debt in the best way possible for you, especially when youre least interested in the worst alternatives like Chapter 11.

Ace Debt Relief Offers Homeowners Strategy to Quickly Pay Off Mortgage
Debt resolution company Ace Debt Relief announces it is now offering a mortgage savings program that enables homeowners to pay off their mortgages in less than half the time it normally takes.

Maximizing Your Yellow Page Investment
Yellow Page users are the hottest of all prospects – someone who has made the decision to buy, and now is looking for a place to do it. Does your ad convince them that your business is that place?It doesn't have to be the biggest, although that can certainly help.

Ronnie Katz, CPA, President of Finance For Life Selected to Million Dollar Round Table's 'Top Of The Table'
Ronnie Katz, CPA and President of Finance For Life, has been selected as an exclusive member of the Million Dollar Round Table (MDRT)-Top Of The Table. The MDRT, the premiere association of financial professionals, is an international, independent association of more than 35,000 members. This equates to less than one percent of the world's most successful life insurance and financial service professionals. The number encompasses 476 companies and 76 nations.

SPLS, HOLX, WATG and DE Picked by Stock Investment Gurus as Among Top 10 Stocks for 2008
Containing analysis from America's most successful and trustworthy investment gurus, the "Top 10 Stocks from America's Leading Advisors" free report was released today. NewsletterAdvisors.com, a stock research and information service that partners with the country's leading advisors to bring investors the most compelling stock investment opportunities, produced the report.

Investment Advice ? Why You Should Start Investing In Exchange Traded Funds Today
Exchange Traded Funds (ETFs) are the rage today with many investors flocking to purchase them as opposed to the usual mutual funds. ETFs work in this way. The fund manager decides that he wants to mimick the returns of the NASDAQ so he just buys all the stocks that make up the index and then he sells shares in this fund to investors. This means that you have effectively diversified your risk when compared to another investor who buys and individual share. There are three related reasons why there has been an upsurge in recent years in the number of fund managers setting up these funds.

Greece Property Investment Soaring Following Major Infrastructure Improvements
Thanks to improved communications and transport networks, the Greek islands are experiencing tremendous growth in Greece property investment.

Choice Finance Corp. and Provident Bank Partner to Provide Home Equity Lines Below Prime Rate
Choice Finance Corp., a Mid Atlantic Mortgage Lender, announced its partnership with Provident Bank to offer Home Equity Lines of Credit and Home Equity Loans through their Broker Home Equity Division.

Why Bad Credit Doesn?t Mean No Mortgage
With more than half of the UK population having more than what?s classed as ?manageable debt?, it?s perhaps not surprising that bad credit mortgages are becoming more widespread. Getting onto the property market can be hard enough, but with a low credit rating it can be almost impossible, so the lenders and companies that offer bad credit mortgages are helping millions of new homebuyers everywhere.

Greenhill Finance Explains Why Falling House Prices Are Really so Scary
A steady increase in customer enquiries reflect how many clients are becoming very concerned about a possible recession and losing money on their houses.

Biotech Finance Prodigy Sets Sights on New Music Label, Providence Records LLC
From Behemoth Biotech to Beautiful Ballads: Kevin Vass, a finance employee at Amgen, takes his business skills to the world of music by starting a record label to launch his wife's debut crossover classical album.

Offset Mortgage Centre Compare Flexible Loans
The Offset Mortgage Centre, a website providing free mortgage advice and tips, tell investors how to compare flexible loans in their recently published article.

4 Important Questions to Ask Before Refinancing Your Mortgage
Thinking of refinancing your home mortgage can seem overwhelming, with so many options on the market. If you break your thought processes into four categories it will be a whole lot easier for you to focus: Think about the term of your mortgage, your current interest rate compared to the new rates on offer, are you staying put or planning to move in the short term future, and do you have enough credit to find a mortgagee happy to take over your loan?

About Differing Mortgage Rates in Colorado
People who are searching for a Colorado mortgage loan may wonder how the mortgage rates in Colorado may differ from the rest of the country; are they higher or lower? While the basic answer is no, it is a bit more complex when you are looking at the details for mortgages in Colorado.