Congress to tackle Net taxes, privacy

WASHINGTON - In its new session that began this week, the U.S. Congress is facing two big high-tech issues: Internet taxes and online privacy.

On the tax issue, in particular, the clock is ticking. The Internet tax moratorium act, which blocks new and discriminatory taxes on Internet transactions, expires in October.

But since the moratorium was passed in 1998 with strong bipartisan support, there has been a great awakening among brick-and-mortar businesses about the fairness of a system that forces traditional retailers to collect sales taxes in many states while pure-play Internet retailers generally don't collect it. A battle over the moratorium is possible this time around.

David Bullington, a vice president at Wal-Mart Stores Inc. in Bentonville, Ark., said the moratorium extension "puts off the tax fairness question." He, along with other major businesses, wants Congress to take up the "tax fairness issue" as part of the moratorium.

But the top issue will be privacy, and dozens of bills are expected.

Congress could easily divide along party lines and not accomplish anything. But the strong bipartisan support for privacy protections makes it "more likely to pass in this Congress than less likely simply because of that interest on both sides of the aisle," said Steve Emmert, director of government affairs at London-based Reed Elsevier Inc., which owns Lexis-Nexis information services.

The Bush administration remains a wild card on the privacy issue. In the campaign, Bush said privacy protections are needed but he also complained about excessive federal regulation.

"You can talk about being against regulation and against big government. The question is, are you also going to be against consumer privacy, are you going to be against privacy rights for American citizens?" said Marc Rotenberg, director of the Electronic Privacy Information Center (EPIC) in Washington. "I don't see any particular reason why the Bush administration would take those positions."

Work in Congress will begin in earnest after Bush is inaugurated.

The House Commerce Committee will see a raft of privacy bills early on in the session. One expected bill will seek to give end users the ability to "opt-out" from having cookies placed on their computer systems, said congressional sources.

The Senate Commerce Committee will likely see a reintroduction of Arizona Republican Sen. John McCain's privacy bill that would require Web sites to disclose how customer data is used as well as give them a chance to limit how they use it.

The high-tech sector is divided over whether privacy legislation will help or hurt e-commerce.

"I think that if it's done right, [privacy legislation] is a real potential boon to the industry in terms of allying people's fears about security and privacy in e-commerce transactions," said Chris Kelly, chief privacy officer at broadband provider Excite@Home Corp. in Redwood City, Calif.

But Harris Miller, president of the Information Technology Association of America, a high-tech trade group, says there's no need for legislation, especially with the advent of the Platform for Privacy Preferences Project (P3P) standard, which would convert a company's privacy statement into something that would be read by an end user's browser, allowing consumers to compare any P3P-compliant privacy statement to their own preferences.

Among businesses, proponents of privacy legislation say federal intervention is needed to pre-empt emerging state laws on privacy. But Kelly believes that the courts have already signaled, by knocking down some state antispam laws, that the states can't regulate interstate commerce: That job belongs to Congress.

The push for privacy is largely coming from consumer interest in it. Politically, the privacy issue is seen as having won respect in this November's election. A number of winning candidates, including two freshmen senators, Bill Nelson (D-Fla.) and Maria Cantwell (D-Wash.), highlighted Internet privacy in their respective races.

"That really shows that this is an issue that may not be the rise and fall of a candidate but is something that is part of the package," said Ari Schwartz, a policy analyst at the Center for Democracy and Technology in Washington, a privacy advocacy group.

If Congress doesn't extend the tax moratorium, it may not be the end of the world for e-businesses.

Jay Stanley, an analyst at Forrester Research Inc. in Cambridge, Mass., doubts that states would rush to find ways to apply taxes to online transactions. "It would just create so much attention and such an uproar that I can't imagine local politicians anywhere wanting to be in the middle of such a maelstrom," he said.

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For more coverage of data privacy matters, visit Computerworld's Privacy Issues page.

Copyright © 2001 IDG Communications, Inc.

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