E-business in a globalising world: Hong Kong legal and tax perspectives

E-business is a means of globalisation which has attracted company management attention because of its tremendous growth potential. A recent study indicates that online retail sales in the United States will grow from US$172 billion in 2005 to US$329 billion in 2010, which represents a 14 per cent compound annual growth rate over the next five years. In cyberspace transactions where there are no physical business establishments, e-business in a globalising world has created new challenges and opportunities. An important issue for company management is to understand and assess the legal issues and taxation implications of e-business. The objective of this study is to carry out an investigation into the challenges for legal and tax aspects in the globalisation of transnational business. By adopting a traditional legal research methodology and using a tax research process, this study attempts to provide insights to the legal and business literature. It will explore the common law general principles which could be applicable to e-business(particularly the aspect of law of contracts) and will examine the taxation implications of e-business transactions (e.g. which jurisdiction has the right to tax the eprofits). Hong Kong is selected for this study because its legal system is well-respected by investors and its tax system is simple to understand and administer. Furthermore, Hong Kong is important in terms of e-readiness because it has obtained the highest internet penetration rate (measured as a percentage of population) in Asia and the ninth highest rate in the world in September 2006.