US extends tax-free Net to 2006

The moratorium on multiple and discriminatory Internet taxes looks likely to continue, following the House Judiciary Committee recent vote by 29-8 to pass an amended version of HR3709. The Advisory Commission on Electronic Commerce sent its majority report to Congress last month. The Committee also agreed to eliminate all taxes on Internet access, so repealing an existing Federal law, but this is misleading as not all of the US has free local access to the Internet, and there are taxes on telephone accounts and calls. Nevertheless, the moratorium on tax-free purchasing via the Internet should continue until 21 October 2006. Local traders have complained this is unfair since their customers do have to pay state and city taxes. Grover Nordquist, a member of ACEC, said that it lays the groundwork for even more taxpayer-friendly Internet legislation next year. On an unrelated international tax matter, the US has until 1 October to comply with the WTO decision that its foreign sales corporation scheme is an illegal trade subsidy. If it is not then ended, the EU could retaliate by putting substantial tariffs on US exports, including IT. It is believed that this has made it possible for Microsoft, Intel and other major players to reduce their taxes by 15 per cent. However, the US government intends to repeal the FSC programme and then introduce new legislation to reduce income taxes on the foreign subsidiaries of US companies. This may be challenged again by the EU.