Opinion: Taxation in the New Economy
What the Phily $300 blog tax means for the rest of us
The City of Philadelphia, PA, has levied its Business Privilege Tax on residents that engage in “activity for profit” — activity that includes blogging, provided a user’s blog runs advertisements or makes money in other ways.
It's only a matter of time before every tax department in the world believes it's got a right to a share of anything you make on the web. I don't have a problem with web income being taxable. I don't have any. Government services have to be paid for by taxation, as true in the new economy as in the old. What I don't know is how this is going to work for the Average Joe on the Internet...
A certain guilty, lying war criminal called T. Blair Esq. stated during his time in office that he wanted to turn Britain into a 'knowledge economy.' Since we don't manufacture anything any more, and financial services are haemoraging off-shore, it seemed like a laudable ambition. Trouble is, we don't have any of the infrastructure, little of the legislation and none of the cross-border agreement on how this is going to work.
It's a little easier with companies that have statutory financial accounting and reporting rules, but for the individual?
- Whose tax do you pay?
- How much?
- How often?
- Who audits the taxable income to ensure it's fair and equitable?
- How do you collect in a secure and timely manner?
- How do you enforce tax collection?
- How is this going to work across national boundaries for non-domiciled workers?
- What rights to anonymity do you get in your tax declaration?
Here's one that plainly doesn't work:
The Philadelphia Business Privilege Tax requires residents to pay a privilege license for a one-time fee of $300, or $50 annually, in addition to a 6.45% of gross receipts and/or taxable net income, depending on the nature of the business.
The problem is that this license technically applies to any person conducting business activity in Philadelphia, regardless of that activity’s profit or loss margins. That means that Joe Blogger who makes $12 per year from AdSense ads on his blog is theoretically required to pay 6.45% in taxes on that income, in addition to the cost of the license, which vastly exceeds the revenue generated by a blog.
The only good news so far is they can only catch up with you if you include your blog revenue on your tax return. As I understand it, tax avoidance is legal, whereas tax evasion is not. We would never advocate that. RC