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 nyone
who uses the Internet is likely to have read e-mail hoaxes about
Internet taxation, with scenarios ranging from the Federal Communications
Commission imposing a per-minute Internet access charge, to some
sort of tax levied by the United Nations to finance a global army.
These forwarded messages are specious, but they are grounded in
plausibility.
In Europe,
because of how phone bills are structured, many Internet users do
in fact pay by the minute. With a few commendable exceptions, such
as Governor Bill Owens of Colorado, most American governors have
announced that they want to "streamline" their sales-tax
structures, in order to be able to levy taxes on the Internet. Fortunately,
with just over two months remaining on the current federal moratorium
on new Internet taxes, there is no consensus in sight — so
the governors may not get their hands on the Internet anytime soon.
But, on the
international front, taxation and regulation of the Internet are
another story altogether. The U.N. really has proposed levying an
international tax on e-mail and e-commerce for the purposes of redistributing
wealth.
The 1999
United Nations Report on the Human Condition bemoaned the growing
divide between the "haves" and the "have nots."
This was a politically-correct euphemism for the fact that free
people are growing more prosperous, while victims of tyranny are
becoming poorer. The U.N.'s solution, of course was not more freedom,
but more government:
new funds
must be raised to ensure that the information revolution leads
to human development. A 'BIT' tax and a patent tax could raise
funds from those who already have access to technology, with the
proceeds used to extend the benefits to all.
The report
goes on to present a detailed scenario of potential revenue from
e-mail taxation: "There is an urgent need to find the resources
to fund the global communications revolution — to ensure that
it is truly global." One proposal is a BIT tax, described on
page 66 of the U.N.'s report as:
a very small
tax on the amount of data sent through the Internet. The costs
for users would be negligible: sending 100 emails a day, each
containing a 10-kilobyte document (a very long one), would raise
a tax of just 1 cent. Yet with e-mail booming worldwide, the total
would be substantial. In Belgium in 1998, such a tax would have
yielded $10 billion.
Such a tax
would also reward countries that have stifled economic freedom,
at the expense of countries that have fostered entrepreneurship
and innovation. But the U.N. is not alone — other international
bodies have floated the idea too, in quest of a piece of the e-commerce
pie.
In May, the
incoming director general of the World
Trade Organization and Thailand's former deputy prime minister,
Supachai
Panitchpakdi, said, "E-Commerce is such a growing activity
that there is a need for a clear-cut framework of rules." This
of course reflects the United Nations mentality: Anything important
must need government regulation. The idea that e-commerce might
regulate itself is unthinkable.
Just because
a commercial activity is extremely important does not mean that
it needs coercive government control. In The Enterprise of Law:
Justice Without the State, Bruce
L. Benson, Distinguished Research Professor of Economics at
Florida State University, details how complex commercial networks
(such as medieval Europe's
merchant courts or the Hanseatic
League) flourished by creating and enforcing their own legal
standards of fair dealing — notwithstanding the absence of
state regulation. Governmental imposition of governmental commercial
law, Benson explains, had less to do with the needs of commerce
than with the need of government itself to tax and control.
Merchant traders
and e-commerce traders alike made their worlds more prosperous by
expanding their networks. And then, as now, governments rushed in
to "help" (themselves) by imposing controls ostensibly
for the benefit of commerce.
According to
director general Supachai, a WTO working group has been examining
the implications of Web commerce and reviewing what elements of
the 1992
Uruguay round trade pact would need to be revised to address
e-commerce. The group also had been charged with investigating Internet-linked
issues not currently covered in the WTO system — including
taxation. Although no official reports or agendas have been released,
WTO members met last month to discuss the possibility of launching
a new trade round at a Qatar
ministerial meeting in November.
Even the European
Union has joined the fray. On June 5, 2001, the EU's finance ministers
Introduced
a value-added tax on e-commerce and digital products sold over the
Internet. At that time, all EU members (with the exception of the
United Kingdom) were in favor of applying a value-added tax to e-commerce
operations. Observers expect Prime Minister Tony Blair to support
the value-added tax, now that his reelection has been secured.
Two days later after the VAT concept was raised, the European Commission
adopted
a draft directive to create "a level playing field"
for the taxation of digital commerce. Currently, companies based
outside the EU do not have to pay a value-added tax. Under the proposal,
corporations would have to register themselves in one of the EU
member states. Thus, the "level playing field" is to be
created by raising taxes on non-European companies — and thus,
on non-EU consumers. All indications suggest that as e-commerce
continues to grow across Europe, a value-added tax is increasingly
likely.
International
and American politicians are chasing the Internet the way the farmer
wielded his hatchet over the golden goose. Already, the persecution
of Microsoft by the U.S. Department of Justice and 19 state attorneys
general has destroyed hundreds of billions of dollars of wealth
— not just in Microsoft stock, but in the stock of Internet
companies. All of these became much less valuable when people saw
that government intended to treat the industry as it has historically
treated transportation and energy: by picking favorites based on
politics, and stomping on the companies that refuse to pay political
blackmail. And now the European Union is preparing to compound the
problem, by assaulting Microsoft under European fair trade "standards"
which are — amazingly — even vaguer and more easily manipulated
than U.S. antitrust laws.
At home, the
U.S. Department of Commerce reports that the technology sector was
responsible for one-third of U.S. economic growth in the past five
years, accounting for $1.1 trillion in trade. With the United States
driving over 60 percent of Internet traffic — and serving as
home to 80 of the world's top 100 technology companies — U.S.
citizens can only stand to lose by these proposals.
If we remain
passive while foreign governments impose constricting rules on global
e-commerce, we risk localizing Internet users and potential consumers
in specific regions, which would both reduce competition and stifle
growth opportunities. The world's poor aren't shut out of e-commerce
because the U.N. and EU don't have enough tax revenue; they're shut
out because the kleptocracies ruling much of the globe are already
stealing so much.
Want to broaden
the beneficent global network of e-commerce, and enable billions
more people to join the digital revolution? Want to protect American
prosperity? Then ensure that the United Nations — and the rest
of the international parasite class — are kept as far from
the Internet as possible.
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