CEI to Commission: Don’t Shackle E-Commerce with Taxes

Washington, DC, December 14, 1999 – Internet taxes would cause irreparable harm to the New Economy, millions of Internet consumers, and the cause of human rights. These, and other problems that Internet taxation could cause, were highlighted today in testimony given by Fred L. Smith, Jr., President of the Competitive Enterprise Institute, at today’s hearing before the Advisory Commission on Electronic Commerce (ACEC) in San Francisco.

“By advancing trade, expanding individual privacy, disciplining irresponsible governmental action and offering more protection to basic human rights, this technology offers great hope to all mankind,” explained Mr. Smith. “However, the potential gains of the Internet revolution are threatened by the concerns of political jurisdictions, in the United States and abroad, that this new form of commerce will increase the difficulty of collecting a range of current taxes,” Mr. Smith continued.

Taxing Internet transactions, however, would be an extremely short-sighted route to raising revenue. It would mean imposing a static tax structure on a constantly shifting marketplace. “The Internet economy is undergoing basic changes in the way the industry is structured, information is transmitted, exchanges are financed, and individuals ensure that their privacy will be protected. All these and a myriad of other features of this emerging industry are in flux,” Mr. Smith explained.

More important than the fate of individual companies, though, is the threat to privacy that would result from companies having to turn over records of every purchase and every purchaser to so-called “Trusted Third Parties”. Currently some Internet businesses use customer information to target special offers and discounts, but with a national (or global) tax scheme, all the personal information that you give to any online business would be at the government’s fingertips whenever they felt like asking for it.

Giving any government more power to track what individuals do online is also problematic for people around the world. Tax collectors in the US may not feel like they are threatening anyone, but for religious and ethnic minorities across the world, greater scrutiny of their purchases and activity – made increasingly across international borders – could spell disaster.

CEI, a non-profit, non-partisan public policy group founded in 1984, is dedicated to the principles of free enterprise and limited government. For more information, please contact Emily McGee, Director of Media Relations, at 202-331-1010, ext. 209.