In the United States, the Senate has recently been discussing the implementation of an online sales tax –other than how it will work, will it really be beneficial to the economy?
One important argument for the online sales tax is that it will create a fairer base of competition between traditional stores that have a real world shop and online stores. The difference the price that stores can charge online without having a sales tax when compared to stores that have to charge a sales tax can make a major difference in where consumers are buying goods, especially where taxes are over ten percent. Also, many people have begun to abuse these traditional stores, visiting them to try out goods, and then finding the goods online and buying them from there. This leads to increased difficulty on the part of the traditional stores, as they are becoming less of a store and more of a sampler location for other companies at great expense. For many avid users of the internet, this is not a disadvantage, but a benefit. By not placing a sales tax on online sales, many people have called this tax break a subsidization of the internet business, helping to encourage the move to online sales and leading to increased convenience. The playing field isn’t fair – but is that for good or for bad?
With the IRS already lacking the money it needs to run its daily operations, this increased amount of taxation will lead to an increased amount of stress on the organization, making it harder to get all the work required for taxes completed in the same amount of time. This also means that the gains from the taxes may be offset by necessary increases in government bureaucracy to aid these businesses, especially considering the great amount of small business aid that the government offers. This also means more work for these new online businesses, again limiting the development and productivity of these businesses, while also forcing them to get a tax adviser to help them keep their assets organized and their taxes paid as their business grows. In a time of budget cuts and tough decisions, the effects on the economy may be greater than a small boost to the government’s income.
So though the United States is planning on enforcing online sales tax across the entire country, what is the status of a Canadian online sales tax? Canada already has an online sales tax, but the effects of this tax aren’t clear. Canada hasn’t had any major successful online start ups, but that could be contributed to either the sales tax or the lack of success that any company has that is based in Canada (Nortel and Blackberry are some notable examples). Canada applies the sales tax the same way that all GST is applied, with this fair approach being the most advisable option for implementing a sales tax in the United States. The sales tax could lead to a balancing of online and traditional shops, with the economics possibly balancing out, without much of a positive or negative effect. Support for a sales tax will be from those who value traditional stores – should they be saved?