Jimmy Deenihan
Ceist:3 Mr. Deenihan asked the Minister for Finance the proposals, if any, he has to ensure that the relevant tax is paid by companies conducting business through e-commerce; and if he will make a statement on the matter. [16086/99]
Ceisteanna–Questions. Priority Questions. - E-Commerce Taxation.
The primary principles underlying our approach to electronic business are the same as those for traditional business and this is in line EU and OECD norms in this regard. In other words, the current tax rules and systems are applied as far as is possible to e-commerce and where difficulties are encountered with this approach some fine tuning may be necessary. The aim is to ensure a neutrality of treatment of transactions whether carried out by e-commerce or by more traditional commercial methods. For Irish businesses, it is expected that the current taxation rules will be robust enough to cope with any increase in e-commerce transactions.
There is, however, a possibility that there may be some problems with collecting taxes from outside the EU. At the moment much e-commerce transactions relate to the on-line ordering and physical delivery of goods. If there is a significant increase in the amount of goods physically delivered, this could cause some distortion of trade between EU and non-EU traders and this may require further examination. Solutions in the area of e-commerce will require international action and Ireland has been contributing to the debates on solutions at EU and wider international levels.
The Government recognises that there may be a need for future changes to direct and indirect taxes to ensure the effective taxation of e-commerce. We also recognise the advantages of encouraging this sector to grow and the possible competitive opportunities there are for Irish-based businesses in this field. This issue and the need for balance has been examined by the Tax Strategy Group and in a recently published discussion paper by the Revenue Commissioners on electronic commerce and the Irish tax system. I will arrange to have these documents forwarded to the Deputy.
Is the Minister aware of the recent communiqué which was signed by President Clinton and the Taoiseach which put in place an agreement between the US and Ireland? Does he accept that this will lead to more transactions between the US and Ireland? He said it could create problems. How does he reconcile that with sole control of e-commerce transactions in the future?
I am well aware of the agreement signed by President Clinton and the Taoiseach in September last. It was followed by a famous game of golf in a certain part of Ireland with which the Deputy and I are very familiar, he more than I.
I suppose I should have been playing that day.
To give the Deputy some idea of how this market will grow, I will read some figures into the record.
The Minister should not read too many.
The e-commerce market is estimated to be worth between $8 billion and $40 billion at present. Future projections are equally wide-ranging with probably the most conservative estimates coming from the US Government, which stated that it would be worth $365 billion by 2002. The Irish market was valued at less than £10 million in 1997 but this figure is expected to rise to £400 million by 2001. The area will grow considerably.
The Deputy's question is timely in that it refers to ensuring that the relevant tax is paid by companies in this area. The matter is being considered both by the EU and the OECD and it was recently discussed at a conference in Ottawa.
We think we can handle the present tax position but there will be a considerable increase in business in this field. It is an area of taxation which is not just of interest to Ireland but to all our EU partners and our partners in the OECD. It is a matter which the Department keeps constantly under review because the area will grow considerably.
Will the Minister review the current practice of not imposing customs duties on electronic transactions? Will he consider a clearance certificate for people making financial transactions by e-commerce? Is he considering setting up a regulator to ensure that the practice of e-commerce would be controlled?
We are not considering the setting up of a regulator, but the taxation matter is of considerable interest to us and our EU partners. As matters develop we will be looking at this aspect again to see if there is any tax evasion or avoidance which may accrue to member states of the EU.
At the moment the EU is concentrating mostly on the VAT aspect of e-commerce to ensure there are no distortions of trade or losses to the national exchequers. My EU partners and I believe that the current rules are adequate but, since this field is developing so quickly and it is so far-reaching, we may need to revisit the matter in the near future. If we do so, it is likely that it would have to be done at EU level and further afield at OECD level. It is not a matter which the Irish authorities, or for that matter other authorities or member states, would be able to tackle alone.