A global ecommerce boom is sweeping through the country, as more retailers flock to the U.S. to sell their wares online.
But there’s also a new trend to worry about: online sales tax.
A growing number of states, cities and counties are imposing new and hefty taxes on online sales.
The federal government is considering what to do about it, as well.
“I am very concerned about this phenomenon,” Sen. Chris Murphy (D-CT) said Thursday, when asked about online sales taxes in an interview on CBC News Network’s Power & Politics.
“If it becomes more prevalent, it will be a very, very bad situation.”
Murphy was referring to an online tax imposed in many U.K. and U.A.E. cities and territories earlier this year.
It was one of the most aggressive levies ever proposed in the U., with the city of London imposing an 8 per cent levy, and the U of A. in Nova Scotia imposing a 15 per cent.
Murphy said the new taxes could have a significant effect on the U’s economy.
He pointed to a recent report from PricewaterhouseCoopers that found the U could lose $1.3 billion in sales if ecommerce taxes were imposed.
The U.N. Intergovernmental Panel on Climate Change has said a global recession is inevitable if eCommerce taxes continue at this pace.
The tax will likely increase competition, Murphy said, with the online marketplace of choice and online retail businesses likely to have less competition than the traditional brick-and-mortar retailers.
“The online business model, in its current form, will be disrupted,” Murphy said.
“It’s not the way to go about it.
You have to go through a process of changing the laws.”
The U of T study also found that online sales will likely be a smaller part of the U, with ecommerce accounted for just 5.2 per cent of the economy in the next five years.
“That’s not enough for people to be affected,” Murphy noted.
“You’ve got to have a real solution.”
In Canada, it’s not just retailers that are worried.
“There are also a lot of small businesses that have a lot more of an impact on the retail side of things,” said David Pardy, a senior lecturer in international studies at the University of Ottawa.
Pardy said he has studied the issue extensively.
“This is not a new phenomenon,” he said.
“There have been a lot worse things that have happened in the past.”
He points to a 2005 report from the International Trade Commission that found “the impact of the ecommerce tax on Canadian small business owners is significant.”
Pardy and others have estimated that in the short term, the eCommerce tax will be responsible for $20 million a year in lost revenue for the economy.
But in the longer term, Pardy said, it could lead to “negative economic impacts” on Canada’s small businesses.
“We will have more small businesses in trouble.
It will affect a lot less of our small business sector,” he added.
Parry said the U is also seeing an uptick in online tax requests, with many municipalities and provincial governments asking for tax changes in an attempt to reduce the impact of online sales on their economies.
“Many of these changes are actually being introduced without the benefit of any sort of meaningful consultation,” Pardy added.
A recent survey of local government officials in Nova Scotia found more than 70 per cent said they are not familiar with the law, and just a third of those surveyed said they would support an online sales-tax increase.
“So, to me, this is an issue that should be addressed by the federal government,” said Pardy.
He said he thinks the federal Liberals will have to “work with” the provinces and territories to find a solution to the tax.