Treaties in a borderless economy: an analysis of the challenges raised by e-commerce

Abstract

Technological advancements led sales and purchases activities to be performed via the internet giving rise to the formation of e-commerce. However, the international tax laws of cross-border e-commerce activities did not evolve at the same rate. This study is aimed at analyzing the challenges that e-commerce activities raise in the framework of the tax treaties entered into by States. The paper first analyzes the PE definition found in the tax treaties and determines their adequacy with respect to the reality of e-commerce applying OECD Commentaries. Then, it offers a re-evaluation of the PE threshold presenting three different approaches and discussing court cases that have had cascading consequences on the taxation of e-commerce. In the final chapter of the paper, the paper examines the challenges with respect to imposing taxes on e-commerce and reveals the opportunities for BEPS and treaty abuse that e-commerce activities may give rise to. The study ends with the conclusion that there are still actions that need to be taken to ensure that the challenges raised by e-commerce get solved and become expressed in the tax treaties that States sign.