I wrote about this report a year ago, and took a critical look at it: http://cgi.pathfinder.com/netly/editorial/0,1012,31,00.html The sound bite would have made George Bush proud: "No New Internet Taxes." At least that's how articles in c|netand the New York Times described the recommendations of a Treasury Department report released last Thursday. The Times quoted Deputy Treasury Secretary Lawrence Summers as saying, "The key message of the report is, no Internet taxes." Indeed, the 46-page draft sketches out the Clinton administration's tax policy for the Internet and says that no additional taxes should be imposed on the Net. But, dear reader, you have to read the fine print. Which I did. That's where one finds the very clear suggestion that existing tax laws must be extended to encompass the Internet -- in the kind of clumsy and misinformed way that has typified federal forays into legislating online behavior. The theme of the report is clear: Since taxation is largely based on physical presence, the nature of the Net represents a threat to the taxman. Not surprisingly, the IRS could well return the favor by increasing its role in cyberspace. [...] -Declan On Fri, 21 Nov 1997, John Young wrote:
Network World, November 15, 1997:
Welcome To Cyberspace. Your Papers Please?
About a year ago, the Treasury Department issued a little-noticed discussion document entitled "Selected Tax Policy Implications of Global Electronic Commerce" (www.ustreas.gov). Beavering away in obscurity, these unelected technocrats have almost finished turning the broad "implications" into detailed regulations. Like most tax rulings, these regulations require no further congressional action to have the force of law. So, while rehabilitated Clinton apparatchik Ira Magaziner was out mesmerizing the digerati with his "Framework for Global Electronic Commerce," promising free markets and no new taxes, the green-eyeshade boys were quietly laying the groundwork to launch the IRS into cyberspace. ...
The classic strategy of forcing reporting requirements on key "taxing points," such as banks, clearinghouses and other financial institutions, is not likely to work as the need for intermediation on the Internet will be vastly reduced. In many ways, that's the whole point of electronic commerce. Any reporting burdens must be pushed out to the end points of each transaction. How will this be done? This is where Big Brother may arrive big time.
Under active consideration is a plan to require taxpayers to obtain digital IDs for all electronic transactions, keeping records that could be examined on audit. The IDs would be issued by IRS certified agencies, subject to government developed standards to ensure that proper identity checks are performed before anyone is allowed to shop online. The IRS would enforce this by issuing its own digital certificates to issuers of digital IDs so that they can electronically prove that they have received IRS certification. The technology they need to make this happen is available. All that's missing are the regulations forcing compliance. So, stay tuned. If you enjoyed the encryption key escrow debate, you'll love this one.
Bill Frezza
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