Internet Society of Australia
A Chapter of the Internet Society

The letter below was a response to a request for input to the Terms of Reference for the Australian Taxation Office Electronic Commerce Project.

                                 The Internet Society of Australia
                                                    C/- PO Box 468
                                               Paddington NSW 2021
                                                         Australia
                                                   ACN 076 406 801

Mr Frank Merrick
ATO Electronic Commerce Project,
Australian Taxation Office,
28 Railway St,
Chatswood NSW 2067
                                                   26 January 1997
Dear Mr Merrick

The Internet Society of Australia is pleased to be able to respond to your
request for input to the ATO Electronic Commerce Project. We have also
emailed the text of this response to your preferred email address.

Taking each of the Term of Reference in turn:

1:  The items mentioned in this Term are all ones that must be addressed by
an ongoing process of consultation and to some extent evolution. We make the
point however, that many traditional concepts and principles of taxation
(particularly those of "residency" and "permanent establishment" do not
translate into the online world. Attempts to force such concepts onto online
commerce will result in law and practice which is at best meaningless and at
worst counterproductive.

  Issues of evasion, non-disclosure and so forth are no different for the
online world than for anywhere else, though the issues of detection and
enforcement do change dramatically. With respect to detection and
enforcement, we urge that in seeking solutions you do not weaken important
protections (such as privacy rights) that the citizen now enjoys.

  Most if not all of the "problems" that the Internet is perceived as posing
for bodies such as law enforcement and taxation authorities are not in fact
unique to the Internet. Steganography, cryptography, high speed transfers of
data and so forth can all occur on private networks or even on simple point
to point links. One should be careful not to hold the roads responsible for
the carriage of illegal goods, so to speak. 

  In addition, most if not all these tools can be equally well used for good
as for bad. That is to say, it is not the technology which is to be feared,
but the application thereof. Many technologies seen as "problems" may turn
out to be fundamental parts of the solutions! It is therefore important not
to implement legislation that would prevent the legitimate and effective use
of such technologies either by Government or by private citizens.

2:  Any audit methodologies suggested or imposed must be consistent with a
principle of minimum intrusion.

  There is a tendency in online contexts to seek ever-expanding amounts of
information; information which in many cases is gathered "just in case" or
"because we can" and which can be used for purposes it was not intended to
support.

  Thus we urge that any audit requirements imposed be developed in tandem
with suitable protections against the misuse of information collected as
part of those requirements.

  It is also important that requirements imposed on Australian citizens or
corporate bodies not infringe the perceived or actual privacy of foreign
persons or corporate bodies or the laws under which those foreign persons of
bodies operate. Such infringements could severely damage the capacity of
Australian taxpayers to engage in commerce with foreign partners and would
in all likelihood encourage breaches of local law.

3:  We are deeply concerned at the implications in this Term.

  We reject absolutely the notion that organisations such as Internet Service
Providers should become watchdogs for the ATO, or that they might become
responsible for the actions of their customers.

  As more and more of people's activities move into the online world, issues
such as privacy and security will become ever more significant. Many would
argue that their significance even now is severely underestimated by most
regulatory bodies.

  Attempts to enforce (for example) routine reporting of customer activity by
Internet Service Providers or online bankers will drastically erode the
confidence that citizens have in those online services. At very least, this
would be a major brake on the uptake of such services, to the detriment of
the Australian economy.

4:, 5:  The extent to which tax compliance will be effected by systems such
as the Internet will be dependent on two main factors - the extent to which
compliance is practicable in that context and the likelihood of evasion
being detected or enforced. These two factors are of course closely related.

  From a compliance point of view therefore it is essential that regulations
and procedures be comprehensible, reasonably easy to follow and above all
consistent with the context in which they are intended to act. The issues of
detection and enforcement are discussed above.

6:  It is beyond our scope to adequately address this Term, However, we do
caution against attempting to regulate something that is not within the
experience or expertise of the regulators.

  That is, to have any reasonable hope of producing useable, practicable and
effective legislation covering the online communities of the world, the
legislators must be familiar with those communities. To build useable
taxation regimes, the people designing them must themselves be familiar with
the contexts in which those regimes will apply.

  We caution most strongly against allowing law or tax policy to be developed
by persons with no experience of the matters they are seeking to affect, or
who do not themselves operate in the spheres they seek to regulate.

7:  The Internet Society would be happy to advise any Governmental or
regulatory body seeking expert advice on matters relating to the Internet.
Evidentiary issues will tend to be more a technical field than a social one;
our membership includes persons of unparalleled depth of experience in such
matters.

8:  It is of concern to us that the idea of "cost" is so narrowly defined.
Tax regimes perhaps more than any others have the potential to promote or to
stifle business activity. Enormous care must be taken to ensure that tax
policy and implementation do not impact adversely on the ability of
Australian industry to conduct its business in the many local and
international areas of opportunity that the online world presents. Adverse
impacts will indirectly affect all Australians.

9:  To the extent that the Internet and similar networks are global rather
than local, clearly corroborative efforts are likely to be more effective
than isolated regional efforts. However, we urge the ATO to keep in mind the
ways in which Australia differs from other countries. In particular, we have
expectations regarding privacy, expectations regarding freedom of speech and
of assembly, expectations of "a fair go". Physically, we are a great
distance from most other centres, distances that make the carriage of data a
quite different proposition that for, say, the continental USA.

  These practical matters must be kept firmly in mind when considering the
suggestions or requests of external agencies, however similar the problems
and solutions may appear.

10:  The Internet Society of Australia is most interested in remaining
involved in the ongoing discussion and development of tax policy as it
pertains to the online community. We would be pleased to assist in any way
we can.

In summary: The emergence of the online world poses a lot of challenges to
many areas of administration. The Internet in particular is one of the very
few genuinely new modes of human interaction and commerce to have arisen
since the Industrial Revolution. Administrative bodies such as the ATO
should not attempt to force the new into the old. Rather, the ATO and
similar bodies should be looking at the fundamental purposes behind taxation
and seeking to achieve those purposes in the new contexts provided by online
commerce and an increasingly online society.

We would be happy to provide any advice and help you might request. If you
would like further information or wish to contact a spokesperson, please do
not hesitate to write to us care of the above address, or call me on
06/2494627 (bh) or 06/2486607 any time. Alternatively email me at
kauer@pcug.org.au.

Thank you for this opportunity to comment.

Yours sincerely,
Karl Auer
Vice President, The Internet Society of Australia.


The Internet Society of Australia

The Internet Society of Australia was formed in November 1996 and currently
has over 300 members, most of whom have been deeply involved in the
development of the Internet in Australia over a number of years. 

The primary objective of the Society is to give expression to the needs and
wishes of individuals, groups, or organisations that have a common interest
in the viability of the Internet in Australia, so that all Australian users
of the Internet may continue to benefit from and contribute to its
applications, technologies, and evolution. 

The organisation provides a broad-based representation of the Australian
Internet community to business, industry, Government, the media and society
in general.

See Web page: http://www.isoc-au.org.au