The incoming sales tax on online purchases could be illegal.
Or, at best, the Government may have difficulty in implementing and managing this radical new tax.
Research by TTWhistleblower revealed that a similar tax has been struck down – after appeal – in certain States in the United States.
Although Trinidad and Tobago has a different system of jurisprudence from the US, legal arguments against the tax could be similar, a senior attorney explained.
Finance Minister Colm Imbert on Friday announced a seven per cent purchase tax on internet purchase.
Imbert said online purchases amount to US $1 million a day.
Apart from raising revenues, the Minister said the tax will assist local manufacturers.
In the US, the online purchase tax is referred to as “Amazon tax.”
Appeals in Illinois led to the court striking down the 6.25 per cent sales tax.
There were also successes in other States.
But an appeal in New York failed, and the US Supreme Court declined to hear the matter.
In certain States, the online seller – and not the purchaser – is mandated to pay a tax on each sale.
There are different standards in various States, but that is coming to an end with the impending Marketplace Fairness Act, which will pronounce nationally on the matter.
In recent times, some American lawmakers have sought to introduce similar taxes.
Republican representative Jason Chaffetz, of Utah, sponsored the Remote Transactions Parity Bill, but he sparked much criticism.
The US National Taxpayers’ Union slammed Chaffetz for seeking to have consumers pay “hundreds of billions of dollars while imposing unprecedented compliance burdens on small, online merchants.”
Advocates on online tax in the US generally agree on 4.7 per cent tax – much lower than Imbert’s proposed seven per cent.
An analyst in the respected Forbes said an online tax is “a naked attempt by legislators to funnel more money into State coffers.”
The analyst said taxpayers and small business operators are hurt by the tax.
Because of the ambiguity over implementation of the tax in the US, it is also likely that the T&T authorities will have difficulty in imposing this new measure.
Enforcement of the tax may require installation of web-based tax software.
There are a number of critics of the measure, including some who argue that the most effective way to curb online spending is for local manufacturers to improve quality, prices and service.