Politics, Taxes Stir Up E-Commerce Commission

While the issue of potential e-commerce taxes loomed over the first session of the Advisory Commission on Electronic Commerce, the commission grappled with political issues after its chairman recommended that it hire a woman with potential conflicts to be its executive director.

Virginia Governor Jim Gilmore, chairman of the 19-member commission, pushed for the hiring of public relations specialist Heather Rosenker, whose husband works for the Electronic Industries Alliance lobbying group. The group donated $263,000 (US$) in Arlington, Virginia office space to the commission.

Rosenker was eventually hired Tuesday, but not without Utah Governor Michael Leavitt raising questions about her conflict and other members agreeing that her appointment could tarnish the commission’s recommendations to Congress next April.

Gilmore told commission members he would check to see whether a conflict existed and that the commission could move to offices at nearby George Mason University if there were any problems. The commission could have clearly avoided the conflict – or appearance of conflict – by nominating a candidate without ties to the industry.

E-Commerce Taxes Inevitable

While the issue of Rosenker’s appointment caused the most ruckus, commission members were suprisingly united on the issue of e-commerce taxes. Of the 19 members – made up of industry executives, government officials and industry special interest groups – 17 said they believed that the Internet couldn’t remain tax-free.

The discussion centered on how to fairly apply tax standards and not foster a discriminatory taxing method that hinders the explosive growth of Internet commerce.

Our challenge here is not to restrain the growth of the Internet, but to allow the Internet to flourish,” said Charles Schwab President, David Pottruck. “We need to find the balance. Governments need money. Tax systems need to be fair.”

An Ernst & Young study released Tuesday said that tax-free Internet sales in 1998 amounted to roughly $170 million (US$) in lost taxes, compared to $4 billion in mail-order sales.

Of course, those figures will increase dramatically if all projections hold through. Deloitte Consulting released a report Wednesday that forecast e-commerce revenues of $1.1 trillion globally by 2002. Some $842 billion of that would be generated in the United States, the company said.

Wrapping up its inaugural meeting in Williamsburg, the commission is scheduled to meet a number of times later this year to put forth its proposal to Congress. A Congressional moratorium of Internet taxes expires in October 2001.