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Evaluating the Costs and Benefits of Taxing Internet Commerce

35 Pages Posted: 13 Sep 1999  

Austan Goolsbee

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Jonathan L. Zittrain

Harvard Law School and Harvard Kennedy School of Government; Harvard School of Engineering and Applied Sciences; Berkman Center for Internet & Society; Harvard University - Harvard Kennedy School (HKS)

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Date Written: May 20, 1999

Abstract

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.

JEL Classification: H2, K3

Suggested Citation

Goolsbee, Austan and Zittrain, Jonathan L., Evaluating the Costs and Benefits of Taxing Internet Commerce (May 20, 1999). Available at SSRN: https://ssrn.com/abstract=175666 or http://dx.doi.org/10.2139/ssrn.175666

Austan Goolsbee

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Jonathan Zittrain (Contact Author)

Harvard Law School and Harvard Kennedy School of Government ( email )

Cambridge, MA 02138
United States

Harvard School of Engineering and Applied Sciences

1875 Cambridge Street
Cambridge, MA 02138
United States

Berkman Center for Internet & Society

Harvard Law School
23 Everett, 2nd Floor
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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