Boston University School of Law

Virtual Intermediaries:
Consumption Tax Problems in Japan, Europe, and the United States--
The Case of the Virtual Travel Agent

Richard Thompson Ainsworth

57 Tax Notes International 865 (March 89, 2010)
Boston University School of Law Working Paper 09-49


Marketplace technology is (inadvertently) chipping away at the effectiveness of consumption taxes – the Japanese Consumption Tax (CT), the European value added tax (VAT), and the American sales tax (ST) are all affected.  Frequently a technology-patch or a law change can repair the tax-damage, but sometimes even though a patch or a change is known the design of the levy (or the politics behind the design) impedes application.   

This paper assesses these consumption taxes by considering the impact that virtual travel agents have had on revenue yields. The paper draws specific conclusions for the Japanese CT, because this consumption tax seems particularly vulnerable to these intermediaries. 

Based on the structure of the Japanese Consumption Tax and estimates drawn from the performance of virtual intermediaries in the other consumption taxes, this paper estimates that approximately ¥26,532 million in CT has not been collected in Japan each year for the past eight to ten years.  This is the case even though guests may believe that they have paid a full measure of the CT to reservation agents when on-line reservations have been made through virtual travel agents.


Virtual intermediary, VAT, Sales tax, Tax avoidance, Consumption Tax, Travel agent, Internet


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Richard Thompson Ainsworth Contact Information
LL.M. Tax Program
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215

Phone: (781) 773-1052

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