E-Commerce Tax Critics Eager For Solution

ByJohn S. McClenahen Add the voice of former President Ronald Reagan's chief economic adviser to the e-commerce tax debate. Murray L. Weidenbaum, now chairman of Washington University's Center for the Study of American Business, St. Louis, advocates scrapping existing state sales taxes and federal and state income taxes and replacing them with a greatly simplified "cash-flow" income tax that promotes investment over consumption. "Simply increasing the coverage of state sales to include purchases on the Internet would be highly undesirable," states Weidenbaum. Politically, his proposal has virtually no chance of adoption anytime soon. Meanwhile, the CFOs and tax directors of major U.S. manufacturing, telecommunications, transportation, financial, and retail firms continue to be very concerned about e-commerce taxation. Nearly 40% of companies responding to a recent KPMG LLP survey said that the creation of a consistent policy on e-commerce taxation was their No. 1 priority. Significantly, they ranked that higher than continuing the existing federal moratorium on certain new Internet taxes (31%) or banning Internet taxation altogether (24%). Clearly, a belief that e-commerce will grow is one reason behind the expressed desire for a defined tax policy. Some 73% of the 270 executives surveyed foresee e-commerce expanding their businesses during the next five years -- and more than 50% predict it will grow their businesses "exponentially."