House Passes Global Tax Bill

In a vote of 423 to 1, the U.S. House of Representatives passed a bill late last week to prevent the imposition of sales taxes on global Internet sales.

The bill, driven through the House by Rep. Christopher Cox (R-California), mirrors similar legislation passed last year to prohibit local governments in the United States from taxing electronic commerce. That bill is slated to expire next summer, but Cox and Sen. Ron Wyden (D-Oregon) are pushing for a permanent extension to that measure.

The global tax bill now moves to the Senate, where Cox expects a similarly lopsided victory. Prospects for the bill being signed into law look bright, as President Clinton has already voiced his support for unhindered global Internet commerce.

Although the measure simply states the United States’ opposition to sales taxes on e-commerce, Cox believes that it could have significant impact upon other countries who have not yet solidified their positions on the issue.

“It is particularly important for Congress to be on record now in support of a permanent moratorium on e-commerce tariffs,” Cox said, referring to the World Trade Organization meeting scheduled for November 30th in Seattle, Washington. Although none of the WTO’s more than 130 members has Internet tariffs now, several are considering them, he continued, adding “Now is the time to act — before bad things happen.”

Three-Pronged Attack

The new bill includes three major provisions. In opposing tariffs on the Internet, the bill calls on the World Trade Organization to enact a permanent moratorium on e-commerce tariffs similar to the moratorium that Cox and Wyden support in the United States.

If the WTO adopts a permanent ban on tariffs, it would simply be extending the one-year moratorium adopted last year.

Secondly, the bill specifically states the U.S. government’s opposition to “multiple, discriminatory or special taxes” that could give some countries advantages over others in international trade. Some of the smaller, still-developing countries are considering such discriminatory taxes in an effort to profit from exporters who are looking to expand to their markets.

Finally, the bill also rejects the idea of a “bit tax,” which would charge a fee for electronically delivered information such as e-mail.

A United Nations committee has proposed such a “bit tax” as a way to fund technological development in poorer countries. Under the U.N. proposal, the amount of the “bit tax” would increase with the size of the file being transferred.