Notes have been published concerning taxation of commercial websites and Internet servers.
Under OECD guidelines a business is taxed in a country where it has a permanent establishment. If a business is taxed in two or more countries, a measure of relief is provided so that the business pays no more tax than if it operated solely in the higher taxed country. The concept of permanent residence is well established and widely accepted, and has been reaffirmed by OECD as the proper basis for taxing international businesses.
The problem with websites and servers is that they are too ethereal to fit easily into this scheme. The UK’s position is that, in themselves, a website does not establish a permanent presence. The OECD is not united in this view nor in its view on how such operations should be taxed.
The UK wants a solution which is practical and enforceable rather than one which is just legally correct. Where a server is established similarly does not help matters, in the view of the UK government.
[2000]