I hesitate to write about this, but the old "bit tax" idea has surfaced again, this time reported in Electronic Engineering Times, page 1, April 29, 1996 issue. I include the article below. My comments will follow in another note shortly! Europe: Try to send it, we'll tax your bits By Peter Clarke Brussels, Belgium-- A report prepared for the European Commission (EC) urges it to consider levying a "bit tax" on information sent over the Internet and other networks. The recommendation runs counter to the reining sentiment among U.S. regulators, who have sought to avoid being cast as "bit cops." The EC report reasons that the value of the average cyberspace transaction will increase as time goes by, resulting in fewer physical transactions. The upshot, the report says, will be a shrinking government tax base. Evidence of such a trend may already have surfaced: Use fo the Internet to import goods and services electronically from outside the continent has allowed some Europeans to avoid payments under Europe's value-added-tax (VAT) system. Luc Soete--director of the Maastricht Economic Research Institute on Innovation and Technology (Limburg, Netherlands) and chairman of the high Level Expert Group (HLEG) that prepared the report on the social aspects of the information society--has examples at the read to prove the potential of Internet commerce to erode the tax base. Soete observed last week that sending his group's report by mail or courier, rather than electronically, would involve taxes on fuel purchases and on the profits fo the companies involved in physically shuttling the document to recipients. "As society moves toward the information society, tax revenue needs to shift emphasis from material goods to virtual goods and services," he said. I think we will see a very rapid introduction [of such a tax structure] in one or two years' time." Soete said he believes the tax "can be introduced in a very straightforward way. Every telephone operator and service provider has a record of the bytes moved. They can be the tax collectors." He acknowledged the prevailing "negative view about a bit tax" and attributed it in part of "concern that it could inhibit adoption of information technology. But once people have the technology, not many would go back. Whether the tax is 1 cent per bit or 1 cent per kbit is, of course, completely open." At the same time, U.S. regulators, who hope to expand Internet access to schools, libraries and low-income individuals, have resisted efforts to cast them in the role of bit cops charged with monitoring Internet traffic. Free Internet The Federal Communications Commission, which has conducted a series of highly profitable spectrum auctions for wireless and satellite services, last week proposed reserving some wireless spectrum for free Internet access for schools and libraries. Soete last week cast the bit tax as a progressive levy that would fall hardest on big business and that would not deter private individuals from joining the information society. Indeed, the potential of the information revolution to further polarize society is among the concerns expressed in the report. Soete believes the bit-tax should be used to fund social security or welfare. "Labor can no longer be the source of revenue for social security," he said. Steve Kennedy, business-development manager at the Internet service provider Demon Internet Ltd. (London) doesn't share Soete's positive view of the bit tax. "Such a tax would be very difficult to monitor and police," Kennedy asserted. "We transfer about 1.5 Gbytes of data a day, but we don't keep a lot of customer information. Who's going to pay for the equipment and software to log all this?" He added that if his company was "simply taxed on the data transfer, we would have to pass it on to the customers, and that would penalize the small user." The HLEG report is lavelled as an interim document that is intended to generate public comment. The final report will be published by year's end. The interim report can be accessed from http://www.ispo.cec.be/hleg/hleg.htmlJim Bell jimbell@pacifier.com