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Magaziner echoes antitax cry

The White House spokesman on e-commerce speaks: no special taxes or trade duties should be applied to transactions over the Internet.

SANTA CLARA, California--The Clinton White House chief spokesman on Internet commerce came to Silicon Valley today to reiterate the administration's position that no special taxes or trade duties should be applied to Internet transactions.

"Commerce on the Internet is one of the most important areas for accelerating U.S. exports and the growth of the American economy," Ira Magaziner told a conference here on Internet tax issues. "If we could set the right environment for electronic commerce, it may be the best thing we could do to boost trade in the next five to ten years."

Ira Magaziner

The administration is trying to head off moves in 12 other countries, as well as in several U.S. states and cities, to tax Internet transactions or usage.

Magaziner's statements were echoed in Tallahassee, Florida, today. A task force appointed by the state governor recommended that access to the Internet remained untaxed. The task force suggested that any existing state and local taxes on the telecommunications industry be replaced with a single, unified tax levied on all telephone, cellular, and cable television providers--but not Internet access providers.

Both the Florida task force and Magaziner believe that market forces, not regulators, should govern the Net's burgeoning economy. Today's comments were music to the ears of industry leaders who worry that the government will interfere with the growth of the Internet, either out of a desire to regulate a new communications medium or to create a new source of taxes.

Magaziner said the government could play a role in supporting testbeds and research and development, but that the government's only real goal should be to help grow the Net and e-commerce.

"The Internet should be a contract-based medium, not a regulated industry," said Magaziner. He said the government's should create a stable economic environment where commerce can flourish. "We are not going to interfere with the essentially free nature of the Internet. We want to be able to preserve the Internet in its somewhat anarchic nature," said Magaziner.

While Magaziner is viewed as a top official in the Clinton White House, his views differ from those of some other branches of the government. For example, he opposes federal efforts to censor Internet content even though the Department of Justice is defending the Communications Decency Act right now in the federal courts.

Magaziner is also associated with a policy camp that believes the government should lift all regulatory controls on encryption technology, a camp that is opposed by law enforcement agencies including the FBI.

But Magaziner is in charge of one important item on Clinton's second-term policy goal list: encouraging the growth of e-commerce.

The administration's views on electronic commerce are outlined in a draft position paper now posted on the Net to solicit public comments. The final version of the paper is due in March.

Magaziner hinted today at some of the paper's conclusions. He said the administration believes the Internet's major economic impact will come from soft goods--software, entertainment products, information, and consulting services--which are easier to deliver over the Net, as opposed to hard goods that must still be mailed the old-fashioned way.

"There tremendous opportunities for growth in products delivered by the Net," Magaziner said.

Internationally, the administration is already working with the Organization for Economic Cooperation and Development to get industrialized nations to agree on Internet tax and tariff policies.

The federal government would like to discourage states and localities from adopting Internet taxes. But if they do, Magaziner urged them to implement uniform codes so companies don't have to deal with different tax rules for different jurisdictions.

He indicated that the administration will initially try to persuade states towards this position rather than pushing for a federal preemption of local taxes.

That same carrot-instead-of-stick approach characterizes all of the White House's involvement in this issue. Magaziner also said that federal regulators should monitor developments in the electronic payments field rather than to jump in with regulations. "It's too early in the process for government to think about regulation," he said.

And while his role at the White House specifically involves e-commerce, Magaziner also counseled a hands-off stance around Internet standards, rejecting suggestions from other countries that governments should dictate technology standards. "We think that would be folly and highly unwise. We think the market, not government agreements, should determine what wins out. We see no harm in different standards in the market."

Similarly, he urged "market-based approaches" to online privacy protection, an approach being pushed by eTrust.

Photo by Donald R. Winslow, CNET