New Internet Tax Scheme Presents Another Method

A group that provides guidance on how to expand the Internet has come up with a proposed solution to the taxing of goods and services over the Internet, and will present the solution on Friday, Oct. 13. This time, the solution is very simple.

A committee of the National Academy of Science's National Research Council [1] is recommending that everyone pay the same tax rate regardless of where they reside or the state in which the vendor is based. Called a 'flat tax,' the tax would be collected by the vendor.

Sounds good in theory, but a flat tax-based system probably won't work, according to Karl Frieden, a partner with Arthur Andersen [2], author of Cyber Taxation: The Taxation of E-commerce.

Frieden says the flatter a tax is, the more uniform the program, and as a result, the more objection there is to it by states because it speaks against the ability for each state to run its own government as it pleases.