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Tech Execs Predict U.S. Net Tax

By Los Angeles Newsroom
Oct 6, 2000 12:00 AM PT

More than 64 percent of top tech executives believe the next U.S. Congress will move to tax the Internet, according to an Ernst & Young survey released Thursday.

Tech Execs Predict U.S. Net Tax

Federal and state governments have so far put a moratorium on taxing online transactions to protect an industry that is in its infancy. However, many observers argue that tax-free Internet transactions are unfair to brick-and-mortar stores.

The survey, conducted informally among attendees at this week's Wall Street Journal Technology Summit, also found 70 percent predicting Congress will take action to protect online personal information before state governments do.

Gore Preference 'Surprising'

Asked which of the major party presidential candidates would better address the digital future, 45 percent of those surveyed favored Vice President Al Gore while 28 percent named Texas Governor George W. Bush. The national leader of Ernst & Young's Venture Accelerator Group, Roger Mader, found this result surprising in light of the respondents' pro-business profile.

"I think what that tells us is that following closely on the heels of their first debate, there were very few distinguishing policy statements from either candidate on the subject of technology in particular and commerce in general," Mader told the E-Commerce Times.

"Consequently, it continues to play up Al Gore's prominent voice on technology. It reinforces that Bush is not distancing himself in the technology domain in accordance with what would traditionally be a Republican strength in that field."

Surf's Up, PCs Down

Sixty percent of the executives surveyed predicted that most Americans will connect to the Web through devices in their pockets, purses or cars rather than conventional PCs two to four years from now. Fifty-eight percent predicted personal assistants will replace cellular phones.

"The majority felt that PDAs would end up dominating," Mader said, "which to me says that the content and visual capacity was more important than the communication link."

Ninety-three percent said very few Internet users understand or support the concept of copyright protection.

"Since the Napster issue is kind of on the forefront," Mader said, "and 93 percent of the participants polled said that they believe very few users of the Internet today understand or support issues of copyright protection, I interpret that as saying Napster wins, but wins out of ignorance."

Impact of Privacy

More than 60 percent of respondents said concerns about consumer privacy will have a major impact on companies that collect and resell consumer data. Additionally, 55 percent said online advertisers are already making "somewhat of an effort" to protect consumer privacy.

Gabrielle McCaffrey, director of conferences for The Wall Street Journal, said the survey points toward future trends and "offers a solid opinion of leaders in the technology industry."

Taxation Lightning Rod

The study shed light on increasingly prominent e-commerce issues. In particular, Internet taxation continues to emerge as a thorny problem without a consensus solution.

On the one hand, representatives from more than half the states in the U.S. have been participating in public hearings for the Streamlined Sales Tax Proposal. The goal is to find a way to make taxation rules as uniform as possible for online businesses without trampling individual state preferences.

On the other hand, the National Research Council on Wednesday recommended that the federal government institute a single flat-rate tax to be collected by e-commerce companies, regardless of where the customer lives, out of fear that guidelines with any state-by-state variance will prove too unwieldy.


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