High Income View:

Is electronic commerce a tax haven?

Under the Internet Tax Freedom Act of 1998, Sec. 102 an Advisory Committee was established to present it’s views on how to handle the local, state, federal, and international taxation of Internet and it’s use. They have submitted their report recently and all in not well in Capitol Hill. 40 governors across the country have written a letter to Congress denouncing this Committee and strongly disagreeing with their fellow governor and chairman of the committee Virginia governor James Gilmore’s suggestions and findings.

They are arguing for the sake of the economies in their states. The money they will lose if the moratorium on taxation of the internet and it’s use is extended, is the money they need to build schools, roads, public building, and housing in their states according to them. There are being robbed of valuable tax dollars that can spell relief in their communities. Many in Capitol Hill share their view. Out of the nineteen members of the Advisory Committee on electronic commerce only twelve voted, knowing full well that a recommendation needed at least 2/3 of the vote of the committee to be passed to Congress. Eleven voted in favor and one voted against. The rest didn’t bother to vote. Obviously their agenda is quite clear-cut. Lift the moratorium on taxation of the Internet and let those dollars roll into the state governments. They don’t want congress to interfere with their state tax policies. Their argument is simple, Why should one part of the economy suffer from taxation while another enjoys the status of a haven?

A lot of congressmen including Tom Bliley of Virginia, chairman of house commerce committee are arguing for the moratorium to continue and some have even asked for its permanence. These representatives fear that the "taxation and regulation" of the Internet might cause a lot of people to be deterred from using it. Obviously people are not going to stop using the Internet, but regulation might stop the free flow of the Internet which is it’s major characteristic. They feel that other congressmen are only looking out for the interest of the state governments and the large retail chains not the people that they represent in congress. Even though it didn’t meet the qualifications of a recommendation under the law that created the Advisory Committee on Electronic Commerce, Mr. Gilmore still felt strong enough about it to bring it to the attention of Capitol Hill.