Europe: Try to send it, we'll tax your bits

By Peter Clarke

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.

This is a poor reason to adopt a so-called "bit tax." One obvious problem is that a 1-kilobyte letter in which I order thousands of dollars worth of goods is simply not comparable (in "value") to a 1-megabyte telephone conversation (the amount of data transferred, in one direction, in a 2-minute phone call.) If they want to implement a "bit tax" to replace lost revenue, they're left with either taxing bits so high that they recoup the "lost" revenue in the 1-kbyte letter, or reducing the "bit tax" to the level which makes transmission of low-profit items like Internet phone calls, GIFs, or audio files possible. The former won't do any good; the latter is totally unacceptable. Governments may be worried about losing tax revenue, in general, but they are (as usual) FOS. The development of information technology may reduce tax revenues, but if it does, it does this by bypassing the use of services that would have otherwise been necessary. To use the example in the article, if I buy something over the Internet, as opposed to physically driving 20 miles to get it, and it is (efficiently) shipped to me by some method such as UPS, that represents a substantial reduction in the amount of gas I use, the wear and tear on my car, usage of roads, etc. _IF_ taxes exist to pay for some of these kinds of costs, _if_ a more efficient system of product-ordering is developed to eliminate these costs, then (logically) the need for those services is reduced. That means that taxes should drop accordingly.

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.

Soete proves my point. There is a decreasing need for those delivery services, now, so it is logical that costs should be reduced proportionately, including taxes. However, if we look at the situation by pessimistically assuming that the government wants to maintain its revenue no matter what, it's obvious that Soete's position is "logical" from his limited standpoint. The problem is that carried to its ultimate extreme, if technology completely eliminated the need for the services that governments currently provide, those same governments would still want the same amount of revenue! This kind of thinking only makes sense to governement employees.

"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."

This quote seems to assume that tax revenues should be just about as constant and unavoidable as death and...uh...taxes. I would sure like to see some hint of recognition that tax revenues SHOULD fall as a consequence of technological progress.

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."

This is probably the most outrageous and hilarious thing he is saying. If anything, practically no software today has any ability to collect the kind of information he thinks is already being collected.

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.

That's a straw man. What a "bit tax" would do is to skew the market in favor of "low-bit" services, and against high ones. Sending a GIF or an audio file would become cost-prohibitive, while email would stay cheap. While, arguably, there are reasons to charge more for more bits (more transmission capacity is necessary), the amount of that extra charge would probably be exceedingly small if it were "fair."

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."

He completely misunderstands the inability of the system to know the "value" of a given transmitted bit, and without this information the only system left is a flat tax-per-bit which would be entirely impractical.

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.

This is bullshit. He's just trying to sucker the great unwashed into believing that taxing the Internet is a way to make the other guy pay the toll. It won't work.

Soete believes the bit-tax should be used to fund social security or welfare.

Not a prayer! He's trying to get the geezers to look upon the Internet as a cash cow. Jim Bell jimbell@pacifier.com