German Towns and Cities Call for Online Package Tax to Fund City Revitalization

Report from DW

In Brief – The German Association of Towns and Municipalities (DStGB) is calling for a new tax on packages delivered by large online retailers to raise 1.5 billion euros help fund economic revitalization and development in town and city centers. They argue that traditional storefront retailers and restaurants suffered through the pandemic and shutdowns while online retail grew, and claim that the online retailers benefit from local infrastructure such as roads while often paying little or no local business taxes. The association proposes that the package tax be linked to sales volume so that larger online retailers such as Amazon carry the heaviest burden to fund projects to “keep our city and town centers from dying out.”

Context – Claims that online commerce harm local small businesses are as old as the Internet. In the United States, it was the theme of the decades-long fight over “Internet Sales Taxes” (and before that, mail order catalogues) that ended with the US Supreme Court’s landmark Wayfair decision. One line of argument was fairness, the claim that local small businesses pay certain taxes, so it is unfair if remote businesses using the Internet don’t pay the same taxes. The reality is that the largest retail businesses, including Amazon, have facilities in jurisdictions across America and around the world and would pay all the local taxes if they did not receive special tax deals, but smaller businesses using the Internet have no presence in local markets and face challenges selling across state and national borders. A newer phenomenon is taxes imposed on digital companies because digital companies are successful. An example is the Digital Services Tax (DST) ideas that emerged in Europe. They may be tamped down by the emerging global tax deal that includes a global minimum corporate tax rate, but don’t count on them disappearing. The German online retail package tax idea, or efforts by US states like Maryland to create their own state DSTs, illustrates that Internet-based businesses will remain attractive targets for revenue collection.