The Advent of Technology and the Riddle of a Permanent Establishment in Taxation of Online Business Models in Tanzania.

Abstract

The existing tax regime in Tanzania considers company residence presence as a Permanent Establishment (PE) as the nexus defining criterion for tax imposition. Even though the concept has largely succeeded in the past, the emergence of the digital economy raised a lot of challenges and questions of whether there is a need to reconsider the concept as far as taxation of the digital economy is concerned. The remarkable development of the web has brought about the idea and practice of electronic trade (online business), which has reformed how business is led today. Be that as it may, it has brought about difficulties related to the tax assessment from the digital economy. Despite the vital role that the digital economy has played in revolutionizing the way business is done, it has been blamed for facilitating tax loss and tax evasion. The review's outcome has revealed that this traditional notion of PE has historically worked well for taxing conventional businesses; however, the concept of PE, as defined by the Tanzanian Income Tax Act, has failed to address and cover e-commerce issues. Hence, the concept of PE requires substantial modifications to align with the contemporary and future challenges of e-commerce.