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Recommendation 7.4: the independentBanking Review, headed by DonCruickshank, should consider carefullythe problems faced by SMEs inobtaining on-line credit-cardprocessing facilities for e-commercetransactions and should recommendaction as appropriate.7.20 One of the key requirements for abusiness wishing to develop an e-commercecapability on its Web site is to secure a creditcard vendor account so that it can offer itscustomers on-line credit card processing.However, very few UK banks offere-commerce services. Those that dofrequently require a company to demonstrateup to two years’ off-line experience as acredit card vendor before they will giveon-line vendor facilities. In effect, this meansthat new e-commerce businesses in theUK are ignored by the UK banking system.7.21 This vacuum is currently being filledby off-shore banks, and by intermediarycompanies which have set up as clearinghouses providing software and processingsolutions that bridge the gap between theclient’s bank and the vendor’s bank. Highcharges are levied for these services, andvendors can have to wait up to sixty daysfor settlement. Anecdotal evidence (throughthe Team’s Seminars and interviews –see Appendices three and six) suggests thatthe absence of large, trusted UK financialinstitutions from this market, together withconcerns about the cost and potential riskof using small intermediaries, constitutesa significant bar to e-commerce adoptionby UK SMEs. However, consumer trust ine-commerce will be damaged if there isa belief that credit or debit cards will beabused by overcharging – either by mistakeor by fraudulent misuse. In this context,start-up companies will inevitably find itharder to demonstrate that they are able toreceive credit or debit card payments withoutsuch abuse.7.22 There is concern that there is a lackof competition in the market for processingcredit and debit cards in the UK, and this isbeing examined by the Banking Review team(see paragraph 7.19). It is recommended thatthe review team:assesses the extent to which banks’ currentpolicies reflect an accurate assessment of4Forrester Research Report, December 1998risk – or whether it represents a missedopportunity for the banks; andidentifies solutions to any genuine barriersthat may be preventing banks or othersfrom entering this potentially significantgrowth market.Recommendations ontaxation7.23 The recommendations on taxation inthis report fall under the following headings:the need for an updated statement of theGovernment’s overall strategy towards thetaxation of e-commerce;the importance of removing tax barriers tothe start-up of new e-businesses in the UK;the need to safeguard the tax base; andthe need to communicate effectively to smalland medium sized businesses what the taxrules for e-commerce are.Overall strategy:Recommendation 7.5: the InlandRevenue and Customs and Exciseshould publish a comprehensiveInformation Paper in the Autumn(1999) updating the Government’sstrategy for the tax treatment ofe-commerce.7.24 The Inland Revenue and H.M. Customs& Excise issued a joint policy paper last yearthat set out the Government’s strategy forthe taxation of e-commerce. There is alsoongoing co-operation through the ElectronicCommerce Consultation Forum. Considerablefurther work has been undertaken since lastyear both nationally and internationally.Therefore, the team recommend that anInformation Paper, updating the Government’sstrategy, should be published in Autumn1999 – alongside the Pre-Budget Report.Safeguarding the tax base:7.25 The issue of tax losses has attracted alot of publicity, mainly as a result of estimatesof potential tax losses in the US. Oneforecaster 4 has projected US tax revenuelosses of as much as $45bn annually by2003, due mainly to uncollected sales taxes.E-commerce@its.best.uk35