Re: "taxing e-commerce the same way that [..] physical goods traded internationally"
It makes it harder to keep spending more when taking in less.
Right. So what effect do you think that has? Hint: Mrs Thatcher believed in this, and she attempted it for a while, but to her credit she abandoned the idea when she saw the practical effect.
The practical effect being that the burden of spending cuts invariably falls on those parts of the public sector with the least bargaining leverage. Like frontline nurses, teachers, and others the nature of whose jobs makes it difficult for them either to walk off to another employer, or to strike effectively. The management, the consultants and analysts - they all have other options, so either you keep paying them well, or the best of them simply go elsewhere.
That's what happens when you try to "starve the beast", rather than actually doing the hard work of specifying exactly what services to cut. (And of course if you do that, you'll be accused - rightly - of micromanaging, and alienate the very managers who could do most to help you.)