Recognising e-business as separate entity  

Friday, 10 September 2021

No doubt, due to restrictions on physical movement amid the pandemic, online trade has gained increased acceptance among the public. Thus the volume of online commercial transactions has witnessed a remarkable rise recently. Against this backdrop, the question that naturally arises is, if such a rise in online trade, as observed, is making the expected contribution to the economy. If truth be told, so far, they have not been able to add to the government's revenue income at the expected level. This is for the simple reason that they are yet to get the official recognition as regular business ventures. In fact, the e-businesses are not treated as a separate business category, though they operate online, which is quite different from the way traditional business enterprises function. As a consequence, they do not have separate trade licences from the City Corporations as e-commerce units. Neither are they registered with the Registrar of Joint Stock Companies and Firms (RJSC) as such. Without these basic pieces of information to qualify as business entities, they cannot obtain separate Tax Identification Number (TIN) for their online business. This is the reason they face difficulty when applying for bank loans, paying taxes or being treated as an investment category.

Unsurprisingly, the contribution the online businesses, e-commerce entities, that is, are making to the national economy is not visible separately. The reason for such a state of affairs, as could be gathered, is the existing laws guiding their operations. In this regard, the Company Law 1994, the Trade Licence Act 2016 and the Income Tax Ordinance 1984, for example, do not have any provision for identifying online businesses as separate entities. The end result of such a lack of recognition of e-business entities under the law is that most of these enterprises are getting registered as information technology-enabled services (ITES), which are exempt from taxation until 2024. So, one can hardly blame these online businesses functioning as ITES for any tax evasion. In the given context, it is rather the legal lacunae as well as various issues of official nature that are to blame for their lapses, if any.

So, to enable these e-business enterprises, some 1600 of them, according to an estimate, to contribute to government exchequer, they have to be given the needed legal recognition. Oddly though, the company law, or the trade licence Act came when online activities including trading have already made their presence felt. Under the circumstances, the laws controlling businesses and taxation are required to be updated to incorporate online trades as separate entities in their own right.

Once these business activities are recognised as such their contribution to the economy would become visible. What is more, such a legal provision for them to operate will render their business activities transparent and accountable. In its absence, fraudulent practice on the part of some online business entities, as reported lately, may take place. There is absolutely no scope to treat such unscrupulous online operators with mercy. But instances of such dishonest practice by some members of the online business community only point to the fact that it is time they were brought under a legal framework. At the same time, it will also create for them the scope to grow as a separate sector of the economy.