May 25, 2024

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Letter: Online sales tax is a good way to raise revenue

It is difficult to comprehend the world Michael Moritz inhabits regarding his position on the proposed online sales tax in the UK (“An online sales tax will be a further blight on the high street”, Opinion, May 16).

Whether it is convenience, economy in the use of scarce time, lower prices (partly because of the absence of sales tax), or the ease in comparing prices of different retailers, consumers have been migrating away from stores for almost 50 years, beginning with shopping through print catalogues to today’s digital purchases.

In my own case, I can count on 10 fingers the number of times in the past half-century that I’ve bought clothing — from socks and shoes to scarves and hats, and everything in between — in a store.

Why should governments subsidise out-of-store transactions by permitting these purchases to escape sales tax? Heretofore, taxes were not collected on out-of-store purchases for the most part because the technology was not in place to do so, but that is no longer an obstacle.

Now it is just the lobbyists doing a day’s work who are obstructing the foregone tax revenue.

Taxing consumption, such as the proposed sales tax applied to online purchases, is the most progressive tax devised to ensure that governments raise the required revenue from all consumers to pay for essential services.

The last time I looked, the annual purchases of the “one-percenters” were multiples of the purchases of middle-class consumers. Therefore, imposing sales tax on this increasing percentage of total sales — online purchases — will increase state revenue and simultaneously enhance the progressivity of the tax system.

Ira Sohn
Emeritus Professor of Economics and Finance, Montclair State University
Upper Montclair, NJ, US