The Role of Digital Platforms in the Collection of VAT/GST and RST and Its Limits

Abstract

This article examines whether it is appropriate to impose tax liability or collection duty of indirect consumption taxes like value added tax (VAT)/goods and services tax (GST) and retail sales tax (RST) on digital platforms that are not necessarily sellers of the goods or services themselves. This question includes the following considerations. First, is it allowed under international law for a country to impose tax liability on digital platforms just because its residents buy goods and services through them? Second, is it feasible for the country that imposes tax liability on digital platforms to collect taxes even if the platforms have no meaningful physical assets in the territory of the country? Third, under what condition is a country allowed to impose tax liability or collection duty on digital platforms when the tax is supposed to be borne by consumers in the country’s jurisdiction? Fourth, is a putative digital platform a direct seller of goods and services, and accordingly, is it liable to VAT/GST or RST as a supplier? This article presents the following arguments. First, a digital platform may be, in some cases, more properly identified as a party to a transaction with consumers rather than an intermediary for the purposes of private and tax laws. Second, before examining whether a provision that imposes tax liability on digital platforms meets the requirement of a genuine link or nexus under public international law, it is important to investigate whether the nature of the liability is in personam or in rem. Third, it is necessary to make sure that the consumer’s relationship with the digital platform is sufficiently close to justify the tax liability of the platform.