Rorie Stockton
Ultimate Expedition (US) - Season 1

Tax Implications of E-Commerce in Nigeria

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This paper examines the Tax Implications of E-Commerce. The issue of e-commerce and its tax implications continues to receive a high level of attention because of the fast growth of e-commerce activities. In the emerging global economy, e-commerce has increasingly become a necessary component of business strategy and a strong catalyst for economic development. The integration of information and communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in business has enhanced productivity, encouraged greater customer participation, and enabled mass customization, besides reducing costs. Even before the advent of e-Commerce it was not always easy to determine where income arose and some under-developed countries are still battling with the problems of tax planning and administration. This paper examines the concept of e-commerce and its implication on tax planning and administration.

The development of any nation depends on the amount of revenue generated by the government for the provision of infrastructural facilities. One major source of generating this revenue is taxation. According to Azubike (2009), tax is a major source of government revenue all over the world, including Nigeria. Government use tax proceeds to render their traditional functions such as the provision public goods, maintenance of law and order, defense against external and internal aggression, regulation of trade and business to ensure social and economic justice. With developments in the internet and Web-based technologies the distinction between the traditional markets and the global electronic market place such as business capital size among others are gradually narrowing down. The name of the game is strategic positioning, the ability of a company to determine emerging opportunities and utilize the necessary human capital skills to make the most of these opportunities through an e-business strategy that is simple, workable and practicable within the context of a global information milieu and new economic environment. With its effect of leveling the playing field, e-commerce coupled with the appropriate strategy and policy approach enables small and medium scale enterprises to compete with large and capital rich businesses. On another plane, developing countries like Nigeria are given increased access to the global market place, where they compete with and complement the more developed economies. Most, if not all, developing countries are participating in e-commerce, either as sellers or buyers.

2.0 Literature Review
2.1 Meaning of E-Commerce?
Electronic Commerce or E-Commerce refers to commercial activities that are based on the processing and transmission of digitized data, including text, sound and visual images. The essence of E-Commerce is the sale of goods, services or technology using electronic communications. According to Paris, Roland (2001) the shift from a physically-oriented commercial environment to a knowledge- based electronic environment poses significant issues in relation to taxation and tax regimes. One of the most important effects of e-commerce is has been to de-emphasize the significance of the place where economic activity is carried out which makes it difficult to determine which jurisdiction has the right to tax. It has also blurred the traditional distinction between the form of delivery and the substance of what is delivered. Thus, the specific tax implications of e-commerce and the threat it imposes on the established tax systems can be examined by reference to how much e-commerce tends to disrupt the concepts and principles of direct taxation and international tax treaty rules. 2.2 Principles of Direct Taxation and E-Commerce

The discipline of International taxation is governed...