Digital Permanent Establishment (Digital PE): A road ahead for e-commerce taxation

With nations all over the world raising concerns over tax avoidance due widespread e-commerce transactions, it is essential to analyze the shortcomings in the existing law and find practical solutions to plug the issue of revenue leakage.

Any domestic tax statute gets the teeth to impose tax on the people (taxpayers) by the virtue of charging section in the tax statute. The primary requirement to be fulfilled by a contracting state for putting a particular transaction to tax whether domestic or cross-border is to define the incidence & scope of charging section in its domestic tax law. This means that, the contracting state should provide for express provisions in its domestic tax statue in respect taxation system it has adopted (i.e. Incidence of tax / jurisdiction to tax – territorial or worldwide residence taxation).