TELECOM Digest OnLine - Sorted: No Internet Tax? - Don't Be So Sure

No Internet Tax? - Don't Be So Sure

Sonia Blumstein (
Mon, 6 Feb 2006 12:28:25 -0600

New IPI Study: No Internet Tax? Don't Be So Sure; Alarming State,
Local, Federal & International Threats

Contact: Sonia Blumstein of the Institute for Policy Innovation,
703-912-5742 or

WASHINGTON, Feb. 6 /U.S. Newswire/ The Internet Tax Moratorium expires
in 2007, and state, federal and international regulators and
legislators are already targeting the Internet as a lush source of new
revenue, says a new report released today by the Institute for Policy
Innovation (IPI).

George Pieler, an IPI research fellow and author of "No Internet Tax?
Don't Be So Sure," points out that, "Absent a sweeping federal
intervention to secure the Internet's freedom, it will be an
increasingly rich target for revenues and regulatory interference from
all directions."

STATE & LOCAL THREATS: One indication of states' eagerness to collect
Internet taxes is that they quickly began taxing VoIP (Voice over
Internet Protocol). Because VoIP competes with traditional telecom
services, the 2004 moratorium did not consistently block its
taxation. If states are so quick to take this tax advantage, what is
to stop them from taking even more Internet revenue?

"It would be better if competition from VoIP was used as an occasion
to rethink telecom taxation from the ground up," writes Pieler.

FEDERAL THREATS: The Federal Communications Commission (FCC) is
targeting VoIP for contributions to the "Universal Service Fund"
(USF). There is no surprise here, however. The USF is not a
legislated tax, and therefore with minimum scrutiny and oversight from
the congressional budget and appropriations process, is wide open to
increased funding through taxation.

INTERNATIONAL THREATS: In November of last year, the UN failed in an
attempt to create a globally-controlled Internet. If UN had succeeded,
there would be strong pressure to make the currently operating Digital
Solidarity Fund (DSF) -- a UN program designed to encourage companies
to donate part of their profits to the fund for "public technology
projects" -- required instead of optional.

According to Pieler, "As in the United States itself, the universal
assumption that the Internet should be minimally regulated, and not
taxed per se, rapidly seems to be vanishing."

THE SOLUTION: "Before the Internet Tax Moratorium expires in 2007,
Congress and the executive branch should seriously review Internet
taxation from the local, state, national and international
perspective, and determine how best to sustain the largely tax-free
Internet, that has done more good for the world than any bureaucracy
ever could," concludes Pieler.

The Institute for Policy Innovation (IPI) is an independent think tank
with offices in Washington, DC and Dallas, TX.
Copyright 2006 U.S. Newswire 202-347-2770

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