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Recommendation 7.7: the UK shouldcontinue to seek internationalagreement on the application of the“permanent establishment” principleto Web sites by March 2000.Recommendation 7.8: the UK shouldcontinue to play a leading role inOECD work to review the applicationof transfer pricing rules to e-commerce and to develop rules forattributing income to permanentestablishments.Recommendation 7.9: the UK shouldidentify effective mechanisms forVAT collection in respect of consumerpurchases of on-line items fromoutside the EURecommendation 7.10: the taxauthorities need to remain vigilantin ensuring e-commerce does notlead to increased tax evasion andavoidance.Simplifying and thencommunicating the tax rulesfor e-commerce to businessRecommendation 7.11: the UK shouldwork with the EU, the WorldCustoms Organisation and otherinternational bodies to improve andstreamline procedures for thecollection of VAT and customs dutieson small consignments of imports.Recommendation 7.12: the InlandRevenue and Customs and Exciseshould publish improved guidancefor e-businesses, targeted at smalland medium sized enterprises,explaining their tax obligationsand how the tax system will treatcross-border transactions.International coherence andagreementRecommendation 7.13: the UK shouldcontinue to play a leading role in theOECD and in other internationalorganisations to achieve aninternationally agreedimplementation of the frameworkfor the taxation of e-commerceagreed at the 1998 OttawaMinisterial conference.Recommendation 7.14: the UK shouldseek an international examination ofthe implications of e-commercebetting and gaming for the tax yieldfrom this sector.Regulation:Recommendation 7.15: theimplications of the convergence oftelecommunications, broadcastingand information technologies forregulatory regimes and institutionsshould continue to be kept underreview by the DTI and DCMS.Recommendation 7.16: regulatoryregimes affecting other sectors ofthe economy need to be reviewedand reformed by the relevantdepartment responsible for eachsector to ensure they remain relevantto the changes in industrial andmarket structure and new businessopportunities brought about bye-commerce.Recommendation 7.17: the UK shouldpromote a co-ordinated and joinedupapproach to e-commerce acrossEurope and globally.Recommendation 7.18: the UK shouldcontinue to push for e-commerce tobe fully integrated within theframework of international trade.Background anddefinitions7.4 To exploit the opportunities and meetthe challenges offered by e-commerce, theUK needs a competitive and innovativeenvironment and to be part of aninternationally agreed tax and regulatoryenvironment.A competitive andinnovative environment7.5 A competitive and innovativeenvironment is defined in this report asan economic and social environmentcharacterised by:a stable macroeconomic frameworkdelivering sustained non-inflationarygrowth;E-commerce@its.best.uk31