Los Angeles lowers taxes for Internet-based businesses

14:55, March 23, 2010      

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In a bid to save jobs, Los Angeles Mayor Antonio Villaraigosa signed an ordinance on Monday to reduce taxes from Internet-based businesses.

The move was designed to address the concerns of many Internet- based businesses which threatened to move out of Los Angeles after the city switched them from the lowest tax bracket to the highest last year.

The ordinance creates a new business tax category for firms that "generate revenues by providing access to Internet-based electronic applications or Internet-based search engines," according to the mayor's office.

The measure lowers those businesses' taxes retroactively to Jan. 1

"We are sending a message loud and clear that Los Angeles will fight to keep good-paying and high-growth jobs in our city," Villaraigosa said at a news conference at Shopzilla, a West Los Angeles-based Internet shopping site.

Reclassifying Internet-based businesses would reduce the cash- strapped city's revenue by about 3.4 million dollars this fiscal year, according to City Council President Eric Garcetti.

However, the financial loss would be far greater if the businesses were to move out of L.A. in favor of other municipalities with lower taxes, Garcetti said.

The 1,400 businesses that fall under the new business tax classification provide about 6.8 million dollars in overall revenue to the city, according to the city's Office of Finance Director Antoinette Christovale.

"If they were to up and leave, it's not just the 3.4 million dollars that you're looking at, it's the entire 6.8 million dollars, and I think that's very key and important to note," Christovale said.

Los Angeles Area Chamber of Commerce President Gary Toebben praised the ordinance as "the first step in a strategic plan to revise our tax codes so that we can target high-paying jobs for the citizens of our community and grow the tax base for Los Angeles."

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