Can the Net stay tax-free?

A few months ago, thousands of Internet users across Canada were the victims of a clever piece of trickery. A “news” story that claimed that the federal government was planning to tax email was copied and dutifully forwarded to addresses across the country. I received my copy from a friend who is relatively new to the Net, so I gave it an extra read before forwarding it to anyone else. The story said that the federal government was going to tax email by taxing Internet Service Providers on their volume, and use the revenue to prop up a failing Canada Post.

A good hoax, as it turned out, since the government has no such plans. But the story does raise the point: governments everywhere haven’t failed to notice the revenue that the Internet is generating, and whether they admit it or not, they want a piece of the action. A growing concern of provincial governments is the sales tax revenue they are “losing”, as increasing numbers of people order products online and escape the PST.

In the U.S., a little-known panel of 19 people is now considering how to tax the billions of dollars in sales and economic activity that the mushrooming Internet is already generating. The commissios task is to recommend legislative changes that will please both traditional “bricks and mortar” retailers (who want the Net retail sector taxed) and online retailers and their customers, who of course don’t.