Evaluating the Costs and Benefits of Taxing Internet Commerce
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Harvard Law School and Kennedy School; Harvard School of Engineering and Applied Sciences; Berkman Center for Internet & Society
May 20, 1999
Current tax law makes it difficult to enforce sales taxes on most Internet commerce and has generated considerable policy debate. In this paper we analyze the costs and benefits of enforcing such taxes including revenue losses, competition with retail, externalities, distribution, and compliance costs. The results suggest that the costs of not enforcing taxes are quite modest and will remain so for several years. At the same time, compliance costs are also likely to be low. There are benefits to nurturing the Internet but they tend to diminish over time. When tax costs and benefits take this form, a moratorium provides a natural compromise.
Number of Pages in PDF File: 35
JEL Classification: H2, K3working papers series
Date posted: September 13, 1999
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