E-commerce poses the challenge for the tax authorities to protect their revenue base. Tax collection and enforcement is also in the interest of fair taxation and competitive neutrality. Several issues are mentioned in this context, such as disintermediation, anonymity, and alteration of data, enforceability and mobility. There had been considerable speculation as to what overall response governments would adopt towards the taxation of e-commerce. At one extreme, there was the view that e-commerce should in some sense be allowed to take place in a tax-free environment. At the other extreme, there had been speculation on the introduction of new taxes specifically designed to tax e-commerce (e.g. the BIT tax). Neither of these views proved acceptable to governments. The first would lead to governments being unable to meet the legitimate demands of their citizens for public services. It would also induce tax distortions in trade patterns. The second approach could hinder the development of e- commerce and lead to the technology becoming ¡¥tax-driven¡¦. Simultaneously, we have seen that respective governments, collectively the European Union, international organisation like OECD and WTO were reassessing specific tax policies with respect to e-commerce and how such policies may impede or facilitate economic objectives. Further there had been attempts though with relative success to include non-OECD (less developed or developing countries) to participate in these discussions with the task of developing an international consensus for the taxation of e-commerce. This renewed interest and re-evaluation has raised questions as: When does e-transaction constitute taxable sales? What is the tax base for e-transactions, particularly those involve the sale of services and /or intangible property? Which jurisdictions have the right to impose tax on e-transactions? What happens if more than one jurisdiction imposes tax on e-commerce? And what can be the most effective mean of collection. The answers to these questions will help to determine e-commerce tax policies. This paper evaluates the role that different components could play in addressing those questions as mentioned above. Also analyses if and in which way components can assist in collecting taxes from international transactions. It will discuss how focus on improving taxpayer service, aiming at balancing the legitimate interest of authorities and mandatory practical aspects of a mass procedure can be developed. A closer look into the different technical possibilities for development of effective consumption tax system. The concept of the place of supply is important in consumption tax systems. In broad terms, the basis for supply rules falls into two categories: „« those which depend upon identification of a relevant establishment (the supplier in some cases and the customer in others); and „« those, which are based on the place of performance or enjoyment. Since e-commerce makes much more opaque the links between the place of supply, the place where the enterprise is located, and where the service is used or consumed, the Internet raises new compliance issues for consumption tax authorities. How can consumption tax authorities respond to these challenges? A possible approach that is being explored (OECD): „« To agree that rules for the consumption taxation of cross-border trade should result in taxation in the jurisdiction where consumption takes place and an international consensus should be sought on the circumstances under which supplies are held to be consumed in a jurisdiction „« To treat the supply of digitised products as services for consumption tax purposes „« Where business and other organisations within a country acquire services and intangible property from suppliers outside the country, countries should examine the use of reverse charge, self-assessment or other equivalent mechanisms where this would give immediate protection of their revenue base and of the competitiveness of domestic suppliers; „« Countries should ensure that appropriate systems are developed in co-operation with the WCO and in consultation with carriers and other interested parties to collect tax on the importation of physical goods and that such systems do not unduly impede revenue collection and the efficient delivery of products to consumers „« Use technology to develop an effective collection mechanism. Translating the ¡¥place of consumption¡¦ principle into a practical measure necessitates work to agree how that place of consumption should be defined, and how related place of taxation rules should operate. There are also sets of questions around the definition, for consumption taxation purposes, of services and intangible property; and the sort of tax collection mechanisms that it is necessary to put in place to ensure that the taxation principles can operate effectively. In the field of consumption taxes in particular, it is also recognised that there must an examination of how the European Union VAT systems, non-EU consumption tax systems and sales tax systems interact to ensure that solutions are reached which are capable of effective application globally. As regards customs duties, governments will need to ensure that custom procedures do not hinder the development of online ordering and off-line delivery of goods across borders. Developing simplified custom procedures and reviewing the de minimis relief of duties and taxation can best achieve this. The World Customs Organisation is working on this issue. Does public policy direct technology or should technology influence public policy? E-commerce dramatically heightens this dialectic relationship between public policy and technology. On the one hand, public policy created the Internet to meet the demands for military intelligence; and further development of e-commerce requires provision of both infrastructure and third-party enforcement, which may call for governmental intervention and regulation in the future. On the other, cyberspace has grown out of control of traditional governance; bring in a new space for privacy and liberty. The development of the World Wide Web as a forum for commerce pushes the limits of taxation policy. As e-commerce forces policy makers to question the principles of taxation, we must now ask whether technology should adapt to meet the revenue needs of government, or whether government should reform itself to the new means of technology? Where in the middle shall the two meets? Indeed developments in technology are indispensable at least for collection of consumption taxes on e-commerce to provide an automated tax charging and collection mechanism. A system for collecting taxes must be technically feasible, efficient, and cost-effective. This includes the procedures for determining tax rates, collecting taxes, transferring funds to the appropriate government authority, and proving to an auditor that taxes were paid. There are also vide range of proposed solutions based on re-creation of intermediaries (using of ISP or financial intermediaries) to withhold and remit tax to the appropriate tax administration, however and ideal solution in my view would be a balanced utilization of both . As the technology stands today access to the Internet is achieved through the assignment of an IP address, which in simple terms will direct the computer to a signal source connected to other computers. A person by dialling (dial up access using analog modems, dedicated access through leased lines and cable network or wholesale services provided by backbone operators) will call the server of another computer which will then be able to route the call to other Internet nodes until finally the signal from the home computer will be directed to (but also from) a remote computer anywhere else in the world. As the disintermediation in commercial transactions makes it difficult to achieve taxation of all consumption occurring in a given jurisdiction, which traditionally has been effective for collection of the taxes, then my proposal is to create an intermediatory, which is relevant for the digital world. I propose to utilize ISPs as a responsible authority for calculating, collecting and paying of tax. This proposal is aimed at developing a simple, uniform and fair system, which will reduce the burden imposed on retailers, and preserves sovereignty of the countries in case of cross-border e-commerce. As ISPs are easily identifiable hence participating States and Local governments will enter into contracts with them to operate the tax administration. The ISPs will be responsible for receiving required information on transactions from a seller and providing software for determining the taxability of a transaction, the appropriate tax rate, and the tax due. An internationally consistent application of those principles to e-commerce will help to maintain the fiscal sovereignty of countries will achieve a fair share of the tax base from electronic commerce amongst countries and should minimise the risk of double taxation and non-taxation.