Internet and its taxation

Question:

Dear Soete
my name Gabriel and I come from Italy. If you know the Italian situation about Internet's phoenomenon, you'll comprehend the reason I have had to write you. I think it isn't only a problem regarding our Italians but even all the others and the same Intern et. I have heard you want to tax Internet providers and the eletronic mail. With all honesty, I had imagined this thing; You'll have thought:" If people use more fax and Internet e-mail to mail their letters and what must be sent, we must tax Internet". I don't know if you'll have thought in this way, but, even if it's true or false, this decision of taxing Internet, is mistaken.

Look at Internet and think about it; it's our future; a future made by the digital era. Internet has grown for three reasons: its freedom, its cheapness; and its confort. The most important factor is the second; in fact it's enough if we must pay a provid er and the phone; if you'll tax Internet, there will be not many to have this privilege.

If you'll tax e-mail there will be less people, and less letters, and, on this way, less initiatives; Without these initiatives, at the end, Internet will die and I don't think you want this.

I want you think about your decision, because, even if you don't believe it, Internet destiny is on your hands.

Gabriel alopex@iol.it

Asnwer:

Dear Gabriele,
Thanks for your message. Obviously, I fully understand your concerns. Let me simply explain what we are suggesting. First, we are not proposing that a bit tax be introduced, only that one would study the feasability of such a tax, the impact it would have on e.g. INTERNET use, on competitiveness, etc. If having studied it, it looks as if any form of bit tax would dramatically reduce use as you suggest is the case, then of course one should refrain from introducing such taxing system. In other words, we ar e keeping a completely open mind about it, however, I cannot imagine why people would be against the idea of studying its feasability and possible impact.

Second, the reason why a bit tax might be an interesting new tax concept is in the first instance based on the fact that more and more economic activity is taking place through electronic transmission of bits. In other words if society is moving into the direction of an Information Society, the tax basis of society should also shift in that direction. Otherwise we would have ended up today with only the "corn tax" of 150 years ago to pay for all government expenditures.

Third, as in the case of the environment (e.g. free clean air), there will be in the case of "free" information, "negative externalities under the form of "information pollution". Forcing the provider or user of information to pay a small tax per bit, wil l force them to generate at least some value, which might consequently reduce the amount of overinformation.

Fourth our proposal is to use the income generated through the bit tax to reduce the cost of labour in the economy, e.g. through reducing the employers social security contributions. The impact on growth and employment will in all likelihood be substantia l, which is at the moment what frustrates us most, i.e. that the emerging Information Society is creating so little value in our economies and so few jobs.

Finally, let me add that with respect to education establishments, hospitals, community services, etc., one could easily imagine that those would all be excluded from having to pay a bit tax or alternatively would get the amount back on the basis of some new concept of unversal "community" service. In other words, the desire of many users to use Internet to communicate cheaply would still be maintained. However, they wouldn't be able to do this from their work, home or commercial surroundings, but would h ave to go to their local community service.

I hope this clarifies my position,
with best regards,
Luc Soete