Re: OTP, OECD and tax collection

[Hannu Nikkanen <hannu.nikkanen@hpy.fi>]

At 07:33 AM 10/5/98 -0700, John Messing wrote:
>For starters, the group might consider deciding whether to give a warning to
>potential users of the software that use of the software with the options
>you have identified could result in certain legal consequences, in order to
>shield OTP from potential liability, in case a court disagreed with your own
>personal beliefs. Ancillary to that decision, you might consider obtaining
>qualified legal advice as to the potential liability of OTP and/or its
>active members with respect to such issues.

Now we are working with a RFC, so maybe things are simpler. IOTP is kind of
non-binding standard, not a legal person, which would have legal liability.

In some places in the world, there probably will be places, where tax
collection will be mandatory and some law-obeying merchants, which will do
it also in electronic trade, even if that is based on reporting sales to an
authority. 

Merchants and users are legal persons, which must fulfil the requirements
of local requirements of law. IOTP should allow them to configure their
systems accordingly, if we want it to be used. 

However, I wonder, must everything be enbedded inside IOTP or could we
support the cretion a parallel path e.g. for user authentification. 

We might also consider some related points.

- tax. I would quess, that tax can be part of the purchase, a separate
payment (maybe with different time limits) to the authority or some later
procedures triggered by announcement to authority. I guess, that the
merchant should be able to decide, what payments are mandatory before the
merchandise can be delivered.
- user privacy. The user should know, what information is distributed and
to which authority. 
- estimate of total cost. The user should know the expected total cost,
including later taxes.

Hannu

>
>-----Original Message-----
>From: Donald E. Eastlake 3rd <dee3@torque.pothole.com>
>To: John Messing <jmessing@law-on-line.com>
>Cc: ietf-trade@lists.eListX.com <ietf-trade@lists.eListX.com>; Steve Schear
><schear@lvcm.com>
>Date: Sunday, October 04, 1998 7:34 PM
>Subject: Re: OTP, OECD and tax collection
>
>
>>
>>It is up to the consensus of this working group as to what it wants to
>>include, exclude, ignore, or consider in future versions of IOTP.  I
>>do not believe that the operation of software that permits certain
>>options to be activated at the operator's discretion, such as the
>>collection of taxes or the automatic copying of all messages to a law
>>enforcement authority, constitutes consent to the actual activation of
>>such options.
>>
>>I'd be interested in any concrete and specific suggestions you might
>>have to improve the IOTP protocol.
>>
>>From:  John Messing <jmessing@law-on-line.com>
>>Message-ID:  <000801bdefb9$bfdd9500$7825c5a9@www..azstarnet.com>
>>To:  ietf-trade@lists.eListX.com, Steve Schear <schear@lvcm.com>
>>Date:  Sun, 4 Oct 1998 10:09:27 -0700
>>
>>>This is one of those issues which is not as straightforward as it may
>first
>>>appear. Apart from merchants whose businesses are physically located
>within
>>>the borders of an EEC state, the power of the state to tax may depend upon
>>>notions of extraterritorial application of the tax laws. Thus, if an
>>
>>My understanding is that there is some motion towards an agreement
>>within the OECD nations which would eliminate problems of
>>extraterritorial application of law for those countries.
>>
>>>American corporation sells goods to a German citizen and has no office or
>>>outlet in Germany, then in a non-virtual transaction, there is little
>legal
>>>basis for Germany to claim the right to tax the transaction. The German
>>
>>It is my understanding that many places, such as Massachusetts, where
>>I reside, have "sales and use" taxes which tax not just items sold
>>within their territory, but also items imported into and used within
>>their territory.
>>
>>>citizen had to have been physically located in another jurisdiction to
>have
>>>completed the purchase. But in a virtual transaction where the Internet
>>>server and the seller are located physically outside of Germany, the
>>>situation may be less clear. If Germany claims the right to tax any
>>>transaction involving a buyer whose computer or delivery address is
>located
>>>within its borders, a question will arise about the basis in international
>>>law of the power to tax. To the extent that consent to tax is one such
>>>basis, then inclusion of software at the Internet server used by the
>seller
>>>which permits German taxation through OTP could arguably be implied
>consent
>>       ^^^^^^^
>>
>>>to tax -- a result perhaps never intended by OTP or the buyer. It is quite
>>>conceivable that Germany would hire an American attorney to collect such
>>>taxes as postulated by this example through the American courts, which an
>>>American corporation could not ignore. Apart from the issue of taxation,
>>>there are other questions about extraterritorial applicable of laws, such
>as
>>>digital signature legislation, which involve similar considerations. In
>>>order to avoid such questions, OTP refused to consider them in earlier
>>>drafts. Taking a position or refusing to take a position on such issues in
>>>light of the German request probably will result practically in a
>>>substantive decision one way or the other, like it or not, which means
>that
>>>such questions can no longer continue to be ignored as either a
>theoretical
>>>or practical matter.
>>
>>Thanks,
>>Donald
>>
>>>-----Original Message-----
>>>From: Steve Schear <schear@lvcm.com>
>>>To: ietf-trade@lists.eListX.com <ietf-trade@lists.eListX.com>
>>>Date: Saturday, October 03, 1998 10:23 PM
>>>Subject: RE: OTP, OECD and tax collection
>>>
>>>
>>>>David Burdett <David.Burdett@mondex.com> wrote:
>>>>>Tax evasion is as old as the centuries. I doubt that OTP if its used for
>>>>>tax collection by the governments will change peoples inclination to pay
>>>>>(or not pay) one bit. The point is, if governments want to collect taxes
>>>>>then they will find a way to do it and most merchants who have a
>>>>>reputation to protect will follow it.
>>>>
>>>>This is really a rear-view outlook.  If we were in the 16th century, its
>>>>like saying that because the Church has all this authority we're not
>going
>>>>to use the press to print anything secular.
>>>>
>>>>While it may be true that in the short run merchants with reputation may
>go
>>>>along with this foolishness, as long as their risks are low consumers
>will
>>>>shop wherever the price is lowest. 10% or more tax is enough separate
>most
>>>>consumers from their guilt and place the loyal merchants at a
>considerable
>>>>disadvantage. The complaint merchants will pressure the governments to
>get
>>>>tough (regulation always favors the regulated). If governments are not
>able
>>>>to pressure the non-complaint merchants, as I believe they will not (as
>>>>they were unable to stem the Eurodollar trading), this is the beginning
>of
>>>>the end game for such taxes on the Net and perhaps in a broader sense as
>>>>more commerce moves to the Net and places local merchants at an
>increasing
>>>>disadvantage.
>>>>
>>>>--Steve
>>>>
>>>>
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