If you are running a small or medium sized company, then the world may well be your oyster. The electronic world, that is. That was one of the optimistic messages arising from a seminar on electronic commerce, hosted by the OECD in Paris in February. The argument was made that e-commerce, whose value was expected to reach $1 trillion in the next three to five years, is ideally suited to small and medium sized firms. For a start, it was inexpensive to set up a website, certainly when compared to opening up shops in city main streets. And the global reach of the internet was far greater than was possible for most small businesses in traditional physical markets too. In fact, not only is the Internet suited to those smaller firms that already exist, but it was the catalyst for the creation of new ones.
The OECD has been involved in e-commerce work for 20 years or so now, but in recent years that work has taken on a new momentum, and a full Ministerial was held on it in Ottawa last October. The February 4 seminar was a progress check on that work. It was suggested that the Organisation’s job was to demystify and explain e-commerce, to bring this quite tricky and elusive aspect of cyberworld ‘down to earth’. That means understanding it to better legislate for it. That is why gathering data is so pivotal to the OECD’s work. E-commerce has no time for borders; from a purely business viewpoint that is its attraction, and it is perhaps not that surprising that business-to-business trade has dominated e-commerce so far. But for governments, its mercurial quality poses a serious challenge. There are questions concerning consumer protection and privacy on the net. Another riddle is how to tax earnings from cross-border electronic transactions. In the physical world legal and technical mechanisms obviously exist to take care of this, but not yet enough in the e-world. Electronic businesses are developing rapidly, decentralising decision-making and swelling (often untaxed) financial flows. In other words, e-commerce is a serious structural issue for OECD policy-makers which does not seem to fit the taxation paradigm of the physical market place. Some advances have been made, such as the OECD’s taxation framework for e-commerce, concluded in 1998. Still, much remains to be done before governments will feel in tune with the challenge posed by electronic commerce. In the meantime, the fifth wave of growth, the digital age, will continue its forward roll. And small businesses will undoubtedly be among those riding it.
©OECD Observer No 216, March 1999