Clinton Administration Seeks Cyberspace "Duty Free Zone"

The Clinton administration is seeking to 'establish cyberspace as a duty free zone,' in which sales over the Internet would be taxed no differently than traditional transactions.

The Clinton administration is seeking to "establish cyberspace as a duty free zone," in which sales over the Internet would be taxed no differently than traditional transactions.

A draft report expected to be released shortly will spell out ways to achieve the same international free trade goals on the Internet that Clinton has sought in other commercial arenas, according to Roger Salazar, specialty media coordinator at the White House. Among other issues, the report stresses the importance of establishing a uniform commercial code for the Internet, of maintaining privacy in electronic transactions, and pursuing international agreements to open up markets to Internet service providers.

"They're trying to foster cyberspace as a non-regulatory, market-driven medium," Salazar says. "It would advocate no new taxes on the Internet; it would allow electronic payment systems to evolve without government interference; and it would enable market forces to drive the development of technical standards."

The draft, developed by an interagency task force, will be put up on the White House's Web site shortly. There will be a public comment period, and the final report is expected to be released early next year.

The report's stand on encryption, which seeks to retain the U.S.'s limitations on the export of encryption technology, concerns one official from an IT industry trade group. Despite concerns about that and about intellectual property rights, however, the official says he saw the report as a positive step for the IT industry.

"It strikes me as a major statement of policy that is in the right direction, particularly the focus on having the private sector take the lead in promoting the Internet and minimizing any government interference or regulation," says Harris Miller, president of the Information Technology Association of America.

The ITAA released its own white paper this week on state and local Internet taxation, something it sees as a threat to the IT industry and growth of the Internet. Admittedly, Miller says, it might be a challenge to get other countries to agree with the administration's duty-free goals, especially those that rely heavily on value-added taxes. Even so, it is important for the administration to work towards them.

"Duty free sales on the Internet is a fabulous idea," Miller said. "It's a way to shortcut a lot of the movements we're making worldwide to reduce tariffs."

The interagency task force includes representatives from the U.S. Treasury, State, Justice, and Commerce Departments, as well as the Council of Economic Advisors, the Office of Management and Budget, the Office of Science and Technology Policy, the Office of the Vice President, and the Office of the U.S. Trade Representative.

Once the report is released and approved by the president, each agency would be given a function to pursue, Salazar said. For example, the U.S. Trade Representative's office would work on tariff agreements.

The group has been meeting for the past eight months under the direction of Ira Magaziner, senior advisor to the president for policy development. Magaziner was a key player in Clinton's unsuccessful bid to reform the nation's healthcare system at the start of his first presidential term, Salazar said.

"The difference here is that I think the administration initiative on electronic commerce actually fosters less government regulation, as opposed to what the health care reforms did," Salazar said.

The White House is on the World Wide Web at http://www.whitehouse.gov/

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