RE: OTP, OECD and tax collection

[Ian King <iking@microsoft.com>]

I've been down this road a bit with URLREG, so I'd like to comment here:

What this group is (or should be) designing is a protocol to enable certain
activities and behaviors.  If this group is designing a particular software
package, then this is NOT proper fodder for the IETF process.  Moreover,
when you create a protocol that needs lawyers to review it, you're not
creating a protocol, you're creating imperative process.  The protocol
should enable the implementer to accomplish the goals at which the protocol
is targeted.  The implementation may or may not address legal, social,
political or usability issues, but those must be kept clearly distinct from
the protocol itself.  For instance, while some political entities take the
position that some content conveyed via NNTP is unlawful (e.g. obscene),
NNTP itself is nothing more than a transport protocol, neutral to its usage.


In the instant case, it might be valuable to seek expert advice on the scope
of tax schemes that implementers may find they must address, to ensure that
the protocol can express them appropriately.  It's then up to implementers
to see that their software meets the needs of its customers -- including, if
appropriate, tax issues.  Those implementers may seek legal counsel as they
deem appropriate.  

Ian King, QA Lead
TransPoint Bill Presentment & Payment
MICROSOFT CORPORATION

> -----Original Message-----
> From:	Hannu Nikkanen [SMTP:hannu.nikkanen@hpy.fi]
> Sent:	Monday, October 05, 1998 10:45 PM
> To:	ietf-trade@lists.eListX.com
> Subject:	Re: OTP, OECD and tax collection 
> 
> 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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> >>>>
> >>>
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