How can I protect confidential information which I share with other business partners online?

Only a partial answer can be given to this difficult question of confidentiality. The exchange of files by e-mail, ftp, or other means without any specific protection does not offer any guarantee of confidentiality. The exchanged data can easily be intercepted, read, and even modified. One should also take into account the fact that the majority of worldwide electronic exchanges (telephone, fax, e-mail, etc.) with other countries can be intercepted and read by new supercomputers. This means that all significant data from an industrial or commercial point of view can be intercepted and redistributed as soon as it is of interest to rival companies. For instance, a fax or an e-mail originating from an aeronautical manufacturer relating to a commercial bid for an airline could, in theory, become known to a competitor who could then rapidly realign his prices on the first offer and win the bid. Confidentiality of electronic exchanges is therefore crucial, not only for the security of electronic trade, but also for the commercial survival of companies and the privacy of their personnel. At the international level, there are:  guidelines within the OECD relating to the policy of cryptography adopted by the Council on 27 March, 1997, the Wassenaar Agreement of 11-12 July 1996, enforced in September 1996, (comprising 33 countries), the European Union's Regulation (EC) n°3381/94 of 19 December 1994 instituting a community agreement for control of exportation of goods with a potential double use, and the Council Decision 94/942/PESC of 19 December 1994 relating to common action adopted by the Council concerning the control of the exportation of goods with double use. Nevertheless, the cryptography system is a very significant domain insofar as it affects the internal and external security of countries. Each sovereign state applies its own policies to serve its strategic interests.

What are some key issues regarding taxing Internet transactions?

A working group was formed within the Organization for Economic Cooperation and Development (OECD) to examine the means of taxing goods and circulating information via the Internet. In order to determine whether acquisitions coming from a third country should be subjected to value-added tax (VAT), a distinction can be drawn between the sale of goods and the sale of services. Until 31 December 1999, a tolerance had been granted to electronic trade via the Internet, which benefited from exemption from VAT. It is the goal of the OECD to work with foreign governments to achieve agreements that will ensure the following:  no new taxes are imposed that discriminate against Internet commerce, existing taxes should be applied in ways that avoid inconsistent national tax jurisdictions and double taxation, and tax systems treat transactions equally, regardless of whether such transactions occur through electronic means or through more conventional means of commerce. With the goal of achieving a global consensus regarding the taxation of electronic commerce, DECD countries agree that neutrality, efficiency, certainty,  simplicity, effectiveness, fairness ,and flexibility underlie any taxation of the Internet or electronic commerce. In the United States, the Advisory Commission on Electronic Trade has just recommended that Congress extend the moratorium on taxes for Internet transactions until 2006. In the European Union, according to the Sixth Directive n°77-388 of 17 May 1977 JOCE L195/1, it is necessary to determine first whether the sale is of goods or of services (definitions may vary from one country to another), if an acquisition is coming from a Member State, is subject to VAT. There is no customs duty on the import of services within the European Union; the export of services is not subject to VAT.

What are some of the arguments for and against taxation of Internet transactions?

While offering a US perspective, the following article may prove useful for decision-makers in developing countries as they grapple with the issue of whether to tax eCommerce transactions. A congressional advisory panel adopted a package of tax recommendations that would save money for Internet users and benefit such companies as America Online Inc. and AT&T Corp. Yet the Advisory Commission on Electronic Commerce failed to reach consensus on whether or when online purchases should be taxed; it also failed to secure the necessary two-thirds majority support from its 19 members to make its report to Congress a formal recommendation. The panel endorsed a plan to extend the current moratorium on new Internet taxes until 2006, create a process for state and local governments to simplify sales taxes, and repeal a 3 percent federal telecommunications excise tax. The telecommunications tax cut is worth $52 billion over 10 years and is designed to lower consumers' cost of getting on the Internet, its supporters said. "That is a major tax cut for the people of America," said Virginia Governor James Gilmore, the commission's chairman. Even without an agreement on the central question - whether sales taxes should apply to Internet purchases - the commission's report is likely to serve as a roadmap for Congress. The House Commerce Committee plans hearings on the tax issues Thursday [23 March 2000], and the Senate Finance Committee expects hearings later this year. Congress created the commission in 1998 when it placed a three-year ban on Internet access taxes and other taxes that target the Internet. The panel, which has spent 10 months trying to decide whether or how to tax online purchases made by consumers, must report to Congress by April 21[2000]. The commission's meeting came to a dramatic conclusion as pro- and anti-tax forces met privately Monday night and again this morning to try to find the two-thirds majority necessary to make their report to Congress a formal recommendation. Gilmore, AT&T Chairman Michael Armstrong, and Charles Schwab Corp. President David Pottruck led the anti-tax camp and negotiated with pro-tax forces led by Utah Governor Michael Leavitt, Washington Governor Gary Locke, and Dallas Mayor Ron Kirk. "We were so very, very close, but other than a couple of details, we weren't able to reach agreement," Lode said. "And time has run out."

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