Inside Business: Consultants get to grips with the big 'e'

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The Independent Online
NOW THAT Britain seems to have woken up to the entreaties of US high-technology firms to take the internet more seriously, the attention of increasing numbers of organisations is being focused on the implications of e-commerce.

Accordingly, such firms as Andersen Consulting, CSC Computer Sciences Corporation and Ernst & Young have joined forces under the aegis of the Management Consultancies Association (MCA) to publish a report on "The development of the internet and the growth of e-commerce".

The document, which covers topics like security and taxation as well as the impact of digital television, is part of a project devoted to "UK plc on the world stage in 2010". Future documents will look at "business and society" and "politics, economy and the environment".

But e-commerce is likely to excite the keenest interest. As the report says, the internet will severely curtail the ability of national governments to control the practices of global companies. E-commerce will also make it very difficult for national governments to control individuals. The number of people already buying CDs and other goods via the internet is also ground for concern to tax collectors.

Bruce Petter, executive director of the MCA, says there will be a clear need for treaties between countries, or perhaps some system of requiring suppliers of goods to tax customers at source.

But, as the report points out: "If indirect taxation continues to be levied in the country of transaction rather than consumption, there will be direct pressure for the harmonisation of VAT and sales tax levels."

If this is not achieved, it adds, "certain states or countries could gain significant economic benefit from a shift in geographical location of e-commerce vendors". According to the report, the problem is already apparent in the US, where there is no national sales tax but varying levels among the states.

Harmonisation is also an issue when it comes to security. Though Mr Petter believes the problem is not as serious as sometimes suggested, he acknowledges the need to address consumer concerns, particularly regarding payment details.

The report points out that in the virtual world, just as in the real one, consumers will feel safer when dealing with organisations they know. "The importance of branding and trust is evident," it says.

Though various attempts to devise a standard have not yet been successful, the report believes one will emerge from the "quagmire of development initiatives". In fact, consultants are confident that a standard will appear out of necessity. As Mr Petter says: "If you can't have international agreements, you have serious problems."