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A tax on use of Internet does not satisfy a single criterion for a 'good tax'.

CRITERIA FOR JUDGING A TAX

The taxes are judged on the basis of certain characteristics. A 'good tax' should be FAIR - meaning that people should pay taxes depending upon their ability to pay. It should also be NEUTRAL - meaning that two different persons with equal ability to pay should pay the same tax amount irrespective of their other circumstances and actions.

Secondly, a good tax is one that is EFFICIENT - meaning that it should collect adequate revenue with least adverse impact on the economy. A good tax should also be SIMPLE - meaning that it should be easily understood by people who need to comply with it, PREDICTABLE, in order to make an reasonable forecast that is required for tax planning and at the same time, should be easy to administer.

i. Tax on internet is not fair

A tax on using Internet is not fair, because it has no relationship with the ability to pay. It is not neutral, because it taxes a net-savvy individual much more than a computer-phobic person. It is not easy to administer because Internet connects people across political boundaries, while tax is a sovereign state matter. It is not predictable, because of fast changing technical preferences across the world, and because of the difference in the level of connectivity speeds etc, it is not even simple.

ii. Tax in internet is not efficient, simple, predictable or easy to administer

Taxes can theoretically be levied upon ANYTHING in the world. Taxes have been levied on things as strange as 'number of windows in a house', entertainment, gifts, death, food, addiction and even life. However, most taxes serve little purpose other than making our lives more complicated and difficult.

Irrespective of the part of globe in which you live, you can always find an example of a tax that has served no other purpose apart from making life of both the taxpayer and the tax administrator more complicated. It is because of such taxes that the word 'tax' has come to be as hated as it is today.

Tax on internet is neither efficient to collect significant revenue that could replace other taxes like income tax and consumption tax, nor predictable because of the simple reason that people can change their net surfing habits and avoid it. It is also not easy to administer because of the free surfing environment prevailing today, and it is not simple either because of all these complicating factors attached to it.

iii. Tax on internet does not serve any possible purpose

What is worst in case of a hypothetical tax on Internet usage is that it will not efficiently serve any of the purposes for which a tax is raised.

There are three basic reasons for levying a tax - collection of resources for public goods and service, including the government structure; redistribution of income from the rich to the poor and modifying the behavior of people. A tax on using Internet will fail on all counts. It will not raise sufficient resources for public goods and service - on the contrary it will tax a public utility. It will not lead to any redistribution of income in any way, and the only modification of behavior it will cause will be to reduce the usage of Internet, thereby reducing the rate of further growth of modern technology, and creating a hurdle in overall development of our civilization.

Clearly, such a tax will be a highly self-destructive step, which can ruin any country by pushing it a few centuries back in time and development.

Learn more about this author, V. Kumar.
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