Microsoft urges WTO to tackle e-commerce tax

As delegates convene in Seattle to prepare for the World Trade Organisation meeting starting today, Microsoft is urging member countries to prevent differing national rules from undermining global e-commerce, and to keep electronic distribution of software from being taxed.

"Unless the issue is centralised (under the WTO), there will be a mosaic of separate rules that will appear surreptitiously to undermine the global market, " Bernard Vergnes, chairman Microsoft Europe, Middle East, Africa, warned.

Without a single international regulatory framework, Microsoft fears that differing national rules as well as multiple agreements in varied international bodies will make it difficult to run an e-commerce business across the globe, Vergnes said.

Microsoft timed its plea to coincide with the start of the WTO Ministerial Conference in Seattle tomorrow, which could launch a new Millennium Round or meetings covering a number of issues - primarily agriculture and services, but also industrial tariffs, textiles and intellectual property protection.

Microsoft would like the 135 trade ministers from WTO member countries in Seattle to agree to not only place electronic commerce on the agenda, but also to the general principle that existing rules regulating traditional forms of business should apply to the online world, Vergnes said. Microsoft also would like the WTO to agree that where clarifications are necessary regarding the application of existing rules to e-commerce, governments will agree to adopt the least restrictive measures.

This applies particularly to software, where the company wants to maintain a low-tariff environment. In a note accompanying a White Paper on the subject, Microsoft explains that under the Information Technology Agreement (ITA), signatory countries - including the European Union, Japan and the US - agreed to treat software as goods and subject to a zero tariff.

For the Millennium Round however, the European Union has proposed that all electronic deliveries should be treated as services and subject to the General Agreement on Trade in Services (GATS). This would mean that software downloaded from the Internet would be considered a service, thus undermining its tariff-free status.

Microsoft is also concerned by policies in some countries, notably in Asia and Europe, that suggest governments want to view electronic commerce as a new phenomenon requiring a separate and restrictive set of rules. Germany for example has approved a highly restrictive law regulating digital signatures, Vergnes explained.

"We think that all existing rules (applicable to traditional forms of business) should apply," Vergnes stressed.

International negotiations, however, will be necessary to clarify how existing rules apply. In the field of contracts, for example, negotiations will have to take place to determine when an electronic contract is legally deemed to be concluded. To ensure legal security, the stage at which an electronic contract is deemed to be concluded must be the same across the globe.

Microsoft also hopes that the Seattle Ministerial will agree, at a minimum, to a continued standstill on the introduction of new taxes or customs duties on electronic commerce.

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