US Treasury Declares Support for Internet Tax Ban

Mike Godfrey, Tax-news.com, Washington

07 June 2000

The debate over an Internet sales tax ban in the US took another turn this week with a declaration by the US Treasury Deputy Secretary Stuart Eizenstat that the agency was firmly behind a permanent ban, even though such a move would mean a loss of taxation revenues for the government from this potentially lucrative source.

Speaking at the the Computer and Communications Industry Association, Mr Eizenstat said 'We need to be sure that we do not discriminate against sales on the Internet and thereby impede the growth of e-commerce. We need to ensure that governments finance themselves in a way that does not impede the growth of the Internet.' However, Eizenstat was also quick to push home the fact that the Internet should not become a tax haven that would stop the goverment from collecting vital revenues for essential public services.

It seems that the Treasury has come out in support of a permanent ban on Internet sales tax due to a recognition and appreciation of the extent to which Internet and IT companies have contributed to economic growth in the US in the last decade, estimated to be about a third of the total growth, despite accounting for less than 10 percent of the American work force. Eizenstat said 'Information technology has been the largest single factor in the remarkable increase in productivity, which has given us a high rate of GDP growth with very low unemployment and low inflation. It has helped make the United States a high performance economy, powered by technology, driven by ideas, rewarding the value of innovation, flexibility and enterprise, and attaining ever better living standards for its people.'

Eizenstat's remarks on the Internet tax ban are undoubtedly part of the Clinton administration's more general focus on Internet issues and initiatives, which seem to be constantly debated, the US being the home of many of the leading Internet companies and Internet Service Providers. He added 'This Administration has stressed the need for the private sector to lead on Internet policy, avoided unnecessary regulation, and drafted policies that recognize that the Internet has no borders. Nevertheless, government also needs to help instill confidence in the Internet by ensuring that appropriate measures are taken to protect consumers, infrastructure, and our security interests.'

Eizenstat also commented that the Treasury Department endeavours to be up with the rest when it comes to integrating new technology into age-old systems. He stated that the Treasury has had "significant success" using these new technologies, saying 'in some areas, we are ahead of the private sector.' For example, the Treasury Department runs one of the largest electronic payment collection systems in the world, taking in more than $1.3 trillion (US$) per year. Two out of every three dollars of U.S. government revenue are collected electronically. In addition, taxes can be paid online and more than three-quarters of all government benefit payments are made electronically.

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