Consumption tax

Tax and Electronic Commerce


As the digital revolution of the 1990s developed governments became aware of the potential for new communication technologies to deeply transform the way business and citizens operate. A new commercial environment emerged in which businesses have access to world markets at lower cost and where the burden of international borders on their structure has blurred rapidly.

This revolution gave rise to the emergence of “electronic commerce”, which has changed significantly the structure of markets and the nature of transactions. In order to adapt tax rules to this new environment, governments adopted the Ottawa Taxation Framework Conditions in October 1998. As a result of these framework conditions the OECD Committee on Fiscal Affairs (CFA) endorsed the Guidelines on the Definition of the Place of Consumption in the Context of E-commerce in 2001 and the Consumption Tax Guidance Series in 2003


However, it rapidly became clear that the absence of commonly agreed “rules of the game” for the application of consumption taxes creates increasing difficulties for businesses and tax administrations, far beyond “e-commerce”.

In 2004, the CFA published a report called “The Application of Consumption Taxes to the International Trade in Services and Intangibles” shedding some light on these issues.


As a result of this reflection, in January 2006 the CFA adopted a set of basic principles for the development of the OECD International VAT/GST Guidelines.

The development of these Guidelines, which should include the full span of VAT/GST issues relating to cross-border trade, is currently managed by the CFA in co-operation with business and selected non-OECD economies. This work includes public consultations.

“Electronic commerce” is now included as part of  this overall work.


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