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Last Updated: Friday, 9 September 2005, 11:26 GMT 12:26 UK
Tax gets real for eBayers
The internet is not a separate space, but part of the real world. Politicians have to get to grips with this, says technology analyst Bill Thompson.

Image of eBay logo
Millions of people buy and sell on eBay
I have a confession to make. I have never bought or sold anything on eBay or any other online auction site.

This is not an aversion to e-commerce or shopping online, as many online electronics stores will testify. In fact I suspect it is the consequence of being dragged round too many open air markets, car boot sales and second-hand stores by my dad when I was young and impressionable.

But not wanting to buy there myself does not mean that I do not admire the site for what it does. I am always impressed by my trading friends who seem to be able to find obscure toys for their kids - Anne got a Furby for her daughter - or tickets to must-see gigs, as Simon does so often.

It seems I am not the only one to find online auctions interesting.

Revenue and Customs, the new government department that combines the Inland Revenue with Customs and Excise, is looking at trading patterns on eBay in the UK with a view to reminding some of the more profitable sellers that they need to pay tax.

Crossing the line

It is a tricky and complicated area, since selling your personal goods would not normally land you with a tax bill, especially as you are unlikely to make a profit on a second-hand CD player.

But there comes a point where personal selling counts as "trading", and once you have crossed that line you may have to register as self-employed, keep proper accounts and pay tax on your trading profit.

This may seem unfair, and another example of the government interfering with the open internet, but in fact it shows an admirable consistency on the part of the tax authorities, one which it would be great to see elsewhere.

Bill Thompson
If we are going to accept that the net is just part of the real world and not some mysterious "virtual space" where ordinary laws do not apply then we have to be consistent about this
Bill Thompson
As far as they are concerned, income is income, and it does not matter if you sell stuff on a market stall, from the back of a car on a disused airfield or over the net - the law says you have to declare your income and pay tax where appropriate.

Anyone who makes money from online auctions should recognise this and pay up. It is not as if there is a special e-commerce tax that applies only to online sales, which would be both discriminatory and unfair.

This is just the ordinary application of existing rules, and eBay has been charging VAT on sales since 2003. It would be nice to think that this approach had filtered through to the rest of the government, but it is pretty clear that the Home Office has not noticed what their colleagues are doing.

Earlier this week, the Home Secretary, Charles Clarke, called on European countries to force internet service providers and phone companies to keep records of e-mails sent and phone calls made for at least a year.

He wants law enforcement agencies to be able to access the stored records when investigating crimes.

If he had suggested to the European Parliament that postal services should only accept envelopes that have the sender's address clearly written, and that every envelope should be scanned and stored to create a database of letter-post connections, he would be laughed out of town.

Get real

Yet there is no real difference between that and storing e-mail records. It is just that e-mail has a "from" field in it by default so it is easier to do without changing the way it looks to users.

If we are going to accept that the net is just part of the real world and not some mysterious "virtual space" where ordinary laws do not apply, then we have to be consistent about this.

Recent proposals to make it a criminal offence to possess violent sexual images are similarly flawed because they take a law which applies consistently in the physical world and extend it to online activities inconsistently.

At the moment the Obscene Publications Act makes it illegal to publish or distribute material that is likely to "deprave or corrupt".

Current standards in the UK mean that images or even written descriptions of bestiality, rape and sexual violence are therefore not allowed, but the actual ownership of these images is not an offence.

Image of a car boot sale
Bill has too many childhood memories of car boot sales
That law worked well for many years until widespread internet access made it easy to find such images on non-UK websites and download it without being observed or having to smuggle magazines through UK customs.

But the changes create uncertainty about what it is illegal to possess, could criminalise people who have inadvertently downloaded images and do nothing to stop the actual publication of these images in places where they are probably not actually illegal.

The resulting mess will simply undermine people's faith in the regulatory system. Passing laws that treat the net as a special case is dangerous for several reasons.

The first is that technology moves much faster than Parliament, and any laws which are based on assumptions about the nature of the network will rapidly be superseded or simply bypassed.

The second is that such laws perpetuate the myth that the net is somehow separate from the real world.

It is much better to try to find ways in which we can apply existing laws in the networked world rather than simply bring in new legislation to cope with an ever-increasing number of special cases.

Perhaps Charles Clarke can look over at his friend the chancellor to see how this is done.

Bill Thompson is a regular commentator on the BBC World Service programme Go Digital

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