Council Pushes E-Commerce Flat Tax, Vouchers

The National Research Council released a report Wednesday recommending that the U.S. regulate the Web carefully but sparsely, that a flat tax be levied on e-commerce and that low-income families receive vouchers to help them get connected.

The scientific panel, which serves as an informal advisor to the U.S. Congress, said that while the Internet is “fundamentally healthy,” there are problems that must be addressed by the government, industry, and the scientific community that spawned the Web.

“The Net is becoming the centerpiece of every computing endeavor,” said Eric Schmidt, chairman of the committee that produced the 175-page report, “The Internet’s Coming of Age.” The report will be published and sold to the public later this year.

“We are still at the beginning of something colossal,” added Schmidt, who is also chairman of Novell, Inc. in San Jose, California. The Web is still in its adolescent stage, he said.

Flat Tax

The panel recommended that the federal government cut short debates in the 50 U.S. states over taxing sales on the Internet by instituting a single flat-rate tax that would be collected by e-commerce companies, regardless of where the customer lives. That approach will prevent a confusing patchwork of Internet sales tax laws across the country, the report said.

The tax proposal is likely to be among the most vehemently opposed issues, as many state governors and leading e-commerce executives have argued that taxing online sales, especially when e-commerce is still emerging, is likely to stifle growth.

More Access

To boost access to the Internet and end the digital divide, the scientists recommend that the U.S. Congress consider a program similar to food stamps that would subsidize Web access for low-income families. Such an approach would recognize that the Internet has become an important social and economic tool that should not be denied to anyone, the report said.

The panel also called for additional taxes on telephone service to fund efforts to ensure that all libraries and schools are Internet-ready.

Big Picture Advice

The report recommended a change in the way government approaches the Net on social topics. Rather than trying to address specific issues, such as privacy or illegal online activity, lawmakers should be concerned with the Web’s overall operation, the panel concluded. The report stresses that lawmakers should ignore Internet “fads” and stay focused on long-term solutions.

“Laws or regulations run the risk of forcing modifications to the Internet’s basic design, which may have adverse implications that could reverberate throughout,” the report said. “As technology swiftly changes, in many instances a perceived problem may fix itself or evolve into an entirely different one.”

On the other hand, the report recommended continuing the current policy of not regulating the Internet’s infrastructure. New laws or regulations should focus on specific business activities and behaviors, rather than mandating alterations to the technological architecture.

Technical Woes Ahead?

The scientists also flagged potential problems with the size of the Internet, saying that the 4.3 billion network addresses that the current standard for information exchange (Ipv4) was built to handle could soon be surpassed.

According to the report, a replacement standard — IPv6 — should be improved and implemented. Otherwise, the panel warned, “the shortage of addresses will soon be a serious problem for some users and will become a much more pervasive problem down the road.”

Another recommendation was for Internet service providers (ISPs) to be required to publicize information relating to outages and breaches of security as a way of boosting the industry’s ability to prevent future problems.

“As the United States’ dependence on this worldwide network increases, so does the need to avoid problems,” the scientists said in a summary of the report. “A period of watchful waiting is needed.”