handbook-tb

Jinyan Lihas a catch-all effect that allows the effective collection of the widestbase possible, although B2C transactions would not be subject to thisdeeming rule.However, this option is not without disadvantages. It would bea shift in the “source rule” for services. Instead of the place of performance,the source rules would be similar to that in United NationsModel Convention Article 12 (5) (residence of payer) or United NationsModel Convention Article 12 (6). It would be a departure from the currentOECD position that e-commerce payments should be characterizedas business profits, not subject to withholding tax. A withholdingtax might be a poor proxy for a tax on net income and the tax burdenwould be shifted to resident companies, increasing their cost of doingbusiness. If the source-country tax is not recognized by the residencecountry, there is potential for double taxation. Like other options,there are administrative challenges.4.7 VAT registration of offshore suppliersTo ensure the collection of VAT on purchases by domestic customersin B2B or B2C transactions from non-resident vendors which haveno PE in the country would require the non-resident vendors to registerand account for the VAT. South Africa has already introducedthis requirement in respect of “electronic services” in B2B and B2Ctransactions. 106 The threshold for registration is the value of such salesexceeding R50,000.Multilateral cooperation among countries could help make therequirement easier to enforce. Corporations, such as Amazon, eBayand Google would certainly have the technology and administrativemeans to comply with the requirement. In the United States, Amazonand other online vendors are required to collect and remit state-levelsales taxes under the laws of a number of states in which they havea warehouse or distribution centre — the “Amazon tax.” 107 There are106See note 23.107Amazon collects sales taxes on sales sold into over 20 states in theUnited States, see http://www.amazon.com/gp/help/customer/display.html?nodeId=468512. For further discussion, see Brian Baugh, Itzhak Ben-David448