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Thursday, 2 December, 1999, 19:18 GMT
WTO tackles the internet
surfing Should e-commerce be regulated internationally?

Plans to create a regulation-free internet are running into trouble at the World Trade Organisation talks in Seattle.

The battle for free trade
The United States has been pressing for a permanent moratorium on taxation of digital transactions.

A temporary ban has already been in effect since May 1998.

But US Commerce Secretary William Daley says the ban is unlikely to be extended by more than another 18 months, due primarily to opposition in developing countries.

"We're disappointed," he said. "But the fact of the matter is, by the time that extension expires, more countries will appreciate what the Internet can do and what these technologies can do for their economies."

Meeting informally, representatives of some developing countries, which have opposed a permanent ban on cyberspace duties, said they feared burgeoning internet commerce could drive much of the economy underground and ultimately mean the loss of much-needed tax revenues.

A transaction tax?

Alfredo Barriga of Chile, proposed a 5% tax on Internet transactions to be divided evenly between the seller and buyer country.

Nii Quaynor, founder of Ghana's oldest and largest internet service provider NCS Gateway, said he was sympathetic to the idea but said he did not support a single flat rate for all transactions and regions.

"I think eventually small governments like mine will need to make up some revenues in this area," he said.

Limited moratorium

The WTO's existing ban on regulation only applies to the small part of e-commerce that is carried out purely on the web, with no physical goods changing hands - covering such areas as the downloading of software directly onto a personal computer, or the sale of downloaded music, magazines and books.

Anything which is physically delivered, whether goods or services, would be covered by existing WTO trade law, whether it was originally ordered on the internet or not.

With e-commerce is expected to grow from $300bn to $1 trillion in the next four years, companies are concerned that excessive tax collection could inhibit its development.

Some American states are even proposing that companies be required to add software to their websites that automatically calculates sales tax and adds it to any purchase.

Letting the market lead

The United States is also pressing for a general resolution, which is expected to be agreed on Friday, which would urge governments to apply a light touch in regulating the internet.

Mr Daley said that, given the speed at which the internet was changing, markets would have to lead and governments would have to follow.

"Because this technology knows no borders, it is far better for markets to respond than for governments around the world to take action," he said.

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See also:
01 Dec 99 |  Battle for Free Trade
Seattle trade talks timeline
04 Nov 99 |  The Economy
EU threat to e-commerce
06 May 99 |  The Economy
Euro e-trade rules agreed
12 Apr 99 |  Sci/Tech
E-trade stuck at EU borders
20 May 98 |  Business
Keeping cyberspace duty-free
22 Apr 98 |  Business
US pushing for Internet pledge

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