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US Treasury Secretary Speaks Out On Internet Tax "Challenges"

Mike Godfrey, Tax-news.com, Washington

20 November 2000


The US Treasury Secretary Lawrence Summers is sticking to his guns over the issue of Internet taxation. He spoke out once again last week on how the growth of e-commerce is creating "challenges" for tax regulators.

At a speech to the Tax Foundation in Washington, Mr Summers said that tax laws neither block nor create unfair advantages for business conducted over the Internet. He said: 'The search for the solution to these challenges is still in its infancy. But we have worked to establish one guiding principle: This is that our global tax administration system should provide an environment in which e-commerce can flourish, but it cannot permit the Internet to undermine the system of revenue collection upon which our public services depend.'

Mr Summers said that business on the Internet contributes to the "positive forces of global capital mobility," but also creates new opportunities for tax evasion or "abusive tax avoidance." He stated: 'The challenges of e-commerce are many and complex....from the application of traditional rules for determining source of income and jurisdiction, to the risk that sophisticated Internet encryption methods that are developed to maintain commercial secrecy also be used to hide information from the authorities.'

The US administration is hoping to build "an international consensus" on an approach to taxation of e-commerce. Ideally, Mr Summers wants to see tax rules being exactly the same for online and regular transactions and co-operation between countries to prevent double or unintentional non-taxation of e-commerce. It all seems very fair and yet somehow intangible. The US and the EU are forever harping on about Internet taxation but it seems little is being done at present.

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