Internet Tax Moratorium Likely To Be Extended

by Leroy Baker, Tax-News.com, New York

03 April 2003

It seems that internet access in the United States will remain tax-free for the foreseeable future if legislation granting an extension to the 2001 Internet Nondiscrimination Act is passed.

The House Judiciary Committee heard arguments on the issue from both sides of the debate earlier this week. In support of the move to extend the moratorium was former Virginia Governor James Gilmore, who argued that the 'fledgling' e-commerce industry needs protection in order to nurture its growth still further. In his testimony to the hearing, he explained that the US faces a choice between embracing the entrepreneurial spirit engendered by the internet or stunting its growth through burdensome regulation and unnecessary taxation.

However, executive director of the Federation of Tax Directors, Harley Duncan, dismissed Glimore's 'fledgling industry' argument, arguing that the term was no longer relevant. E-commerce is now an established part of the economy and plays in an important role in both domestic and international trade, he said. He added that in the instances where internet activity is already subject to taxation within the US, it had not been negatively affected by the levies.

Duncan recommended a five year extension to the existing legislation rather than the permanent moratorium on internet taxes being pushed for by Gilmore, and argued that jurisdictions which already tax internet access should also be allowed to continue to do so.

Nevertheless, given that the Bush administration is known to be supportive of the legislation, according to some reports, Harley's arguments are unlikely to win through.

Recommended