The use of electronic cash as a means of transacting internet business may prove to be an acceptable alternative to credit card payments. It is reported that the withdrawal of major players from the attempt to develop e-cash is a significant setback. "?The use of digital or electronic cash in e-commerce transactions could lead to difficulties for Revenue auditors. Revenue auditors have traditionally had to grapple with the lack of controls associated with the cash economy. The increasing sophistication of business transactions and the development of a variety of payment methods have meant that cash payments have become a diminishing feature of business transactions."

Look here the power has been restricted under the section 94 of C of Cr.P.C. (Act V of 1898) for getting access to banking records, "?Provided that no such officer shall issue any order requiring the production of any document or other thing which is in the custody of bank or banker as defined in Banker' Evidence Act, 1891(XVII of 1891), and relates or might disclose any information which relates to the bank account of any person except?"

The first and lesser problem relating to the regulation of Internet commerce for tax purposes is the uncertainty of whether current laws will even apply to financial transfers on the Internet. By requiring very specific documentation of every transaction the government can attempt to extend the regulations that apply to paper based banking into "cyber banking". Nevertheless, it appears that this legislation will primarily be targeted at technology such as automatic teller machines and wire transfers, but will not contemplate newer banking applications such as the Internet. For example, the requirements that consumers receive receipts and periodic statements reflecting electronic transfers of money do not make sense when applied to stored-value cards that operate independently of a bank account. Stored value cards will likely replace cash to a significant degree as we move towards an increasingly paperless society.

The developments in electronic payment systems have the potential to create "electronic money." Electronic money is a broad term, and just as electronic money systems differ in their technical features, they also differ in the extent to which they create issues for tax returns. Depending on the type of system used, electronic money can be either an advantage or a disadvantage for collection of taxation.

The electronic money poses a tax evasion potential similar to that created by paper money. This raises the issue of whether the evasion potential is manageable and what must be done to manage it. It is possible that the techniques that have been developed over time to combat evasion using paper money can be adapted and expanded to combat evasion through electronic money.

The Electronic money creates opportunities to deposit unreported income in a bank or other financial institution. As a result of electronic money's advantage in transmitting large amounts of money with relative ease, combined with the continued use of cash, the problem of an underground, unaccounted for economy is likely to be exacerbated.

Electronic money and the Internet substantially increase the ease and safety with which bank accounts can be opened abroad, letterbox companies and trust accounts can be established abroad, and funds transferred anonymously. Such accounts are, of course, subject to the reporting requirements for foreign financial accounts.

The writer is an advocate of High Court and practicing immigration and corporate laws in Pakistan since September 2001. He is a self employed and pioneer in research on electronic commerce taxation in Pakistan. His articles were published widely in the critical areas of cyber crimes, electronic commerce, e-taxation and various other topics. He wrote LL.M thesis on titled "Legislation of electronic commerce taxation in Pakistan" in which he provided comprehensive legal proposals for statutory reconstruction of tax laws for purpose of imposition of taxation on e-business in Pakistan. Currently he is conducting is research on topic 'Electronic commerce taxation: emerging legal issues of digital evidence'.

Author can be contacted by adil.waseem@lawyer.com.