Ministry of Finance will strengthen its online tax program

The Ministry of Finance will start strengthening tax inspections for online stores as soon as March next year to shovel more income into the nation's coffers, Vice Minister of Finance Gordon Chen (陳樹) said yesterday.

The issue was brought up by Chinese Nationalist Party (KMT) Legislator Lo Ming-tsai (羅明才) in yesterday's legislative session, who asked Chen whether transactions made via the Internet should be taxed or not. Chen responded that the ministry had already levied a 5 percent value-added tax (VAT) on locally-based virtual shops, as it does to brick-and-mortar ones.

"We also require online retailers to file tax reports on their sales to customers via the Internet," Chen said. "Recently, we also sent out letters to remind online retailers to provide transaction statements to establish a basis for tax report reviewing."

As there are a considerable number of transactions made via online auctioneers like Yahoo-Kimo Inc (雅虎奇摩) auction site, Chen said small transactions will not be taxed, without specifying what amount would qualify for taxation.

Jerry Fong (馮震宇), a law professor at National Chengchi University who specializes in e-commerce, said online retailers should pay taxes from the standpoint of fairness, but how to implement taxation was a major challenge.

"The ministry even has problem tracking down some small stores or street vendors which evade taxes all the time, not mention taxing retailers in cyberspace," Fong said. "Whether or not transactions made from outside of Taiwan should be taxed is another problem."

As brick-and-mortar vendors can easily dodge taxes by lowering sale prices and not issuing invoices, online vendors could also play the same trick, Fong said.

A division director surnamed Tsai at the ministry's Department of the Treasury said the problem could be solved with the cooperation of local Internet service providers (ISPs), as the ministry is mulling asking ISPs to deny access to online retailers that do not register their businesses to the ministry.