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'The internet is a vast and confusing place, where is a little girl to go?"

- Major Motoko Kusanagi, Ghost in the Shell

The internet is a virtual world which transcends boundaries of culture, religion, countries and thought. It is a parallel universe where each transaction, each reality has its virtual counterpart. In this virtual sphere of existence, rules and and norms applicable to the material world may not necessarily be efficiently operationalized in online transactions or inter-relations.

Electronic commerce laws try to establish rules and norms to govern online transactions, but despite the attempt to create a virtual government, the long arm of the law cannot reach every nook and cranny in this infinite universe of 1s and 0s. The concept of government and its functions cannot easily be constituted in a realm where everything is virtual. Who will be governed, how will they be governed and most importantly, who will govern them? Personas over the internet are represented by a mere succession of numbers (IP addresses). These IP addresses can easily be masked and merely point to a general location. Any attempt to discover the identities behind IP addresses tread dangerously on the right to privacy. Existing as it does in the virtual sphere, there are no clear cut territorial lines delineating jurisdiction.

Take one of the 3 inherent powers of any sovereign --- taxation. In ordinary transactions, especially transactions involving services, the situs of the transaction is paramount. The tax situs is the place where the service is rendered. What is the "place" where service is rendered in purely internet-based transactions? Sections 23 of the e-commerce act and Section 33 of its implementing rules try to address this virtual dilemma by pointing to the originator/addressee's "place of business" or usual/habitual residence. But this again begs the question, "Which address?" "Places" in the internet are merely represented by numbers. These numbers are easily masked. Not all businesses have brick and mortar offices and a lot merely exist unregistered in virtual space. Another issue would be the source principle of taxation. How does one tax a resident German national who sells webpage templates through a website whose domain name is registered in Tanzania? If the BIR cannot even efficiently collect taxes in the real world, the possibility of taxing online transactions proves to be a herculean task.