UBC Theses and Dissertations

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UBC Theses and Dissertations

Income characterization and the sharing of global tax revenues in the context of electronic commerce Nyborg, Anne Mette


The question of characterizing income by its source in the context of electronic commerce has brought forward problematic issues in the international taxation regime. It has presented prominent scholars, administrators and judges with what have sometimes seemed intractable difficulties. Characterization and geographic source difficulties are linked to the lack of international uniformity in the characterization of income from computer software transactions, which expose taxpayers to potentially arbitrary characterization outcomes. Characterization outcomes also affect the global sharing of tax revenues collected from international transactions as the taxation in a particular country is linked to the character of the income. The current international tax system furthermore brings forward problems of equity and the inequalities between developed and developing countries in sharing international tax revenues arising from electronic commerce transactions. In this thesis I analyze the international tax rules currently applied to electronic commerce transactions. I explore the underlying rationale for characterizing income by its source and the international uniformity in the area. I review the international guidance for the application of traditional rules to electronic commerce transactions and examine the international uniformity for the characterization. Moreover, I review the theoretical foundation for the taxation of international income and analyze the imbalance in sharing the global tax base under the current rules. This reveals, that the underlying rationale for income characterization has no convincing support for the continued distinction. The application of traditional rules and concepts reveals uncertainties and complications and there is no absolute international uniformity. Ultimately, the theoretical basis for taxing international income appears to suffer a disconnect and today's system furthermore fails to ensure a fair sharing of the global tax base.

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